Collins Stewart Maintains Sell Ratings On Suntech Power (STP) & Solarfun (SOLF)

According to, Collins Stewart is maintaining its Sell rating on both Suntech Power (STP) and Solarfun (SOLF) but raising its price targets on both.  It’s raising the price target on STP from $6.50 to $10 and raising the price target on SOLF to $3.

Suntech commentary:

Collins analyst says, “Our CY09 forecast calls for STP generate $1.73B in sales and EPS of $0.20, both of which are below the consensus of $1.86B and $0.40. Our forecast is based on module ASPs falling to average $2.37/watt for the year, down from an estimated $3.83/watt in CY08. Recent channel checks have STP module ASPs already in the $2.40-2.50/watt range. STP s wafer prices are assumed to decline, though we note that its large contract with MEMC is likely $0.0.20-0.40/watt about market at this point and will weigh on STP’s GM unless further renegotiated. STP may incur a variety of one-time gains and charges in 1Q09 related to the repurchase of debt at a discount and potentially inventory write downs…We maintain a sell rating on STP as we believe its earnings will remain depressed throughout CY09 and that its valuation is well above its peers.”

Solarfun commentary:

“We maintain a Sell rating on SOLF, but have raised our PT to $3. Our price target is based on a 9x P/E applied to our CY10 EPS forecast of $0.34. The primary risk to our Sell rating is SOLF being acquired at a premium. Good Energies II LP owns approximately a 36.4% stake in SOLF and has investments in other solar assets such as Trina Solar (NYSE: TSL) and Q-Cells. It is possible that Good Energies may be able to arrange merger of SOLF with some other business at a price above current levels. The other primary risk to our Sell rating would be a stronger-than-expected recovery of the solar market in 2H09.”

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