Macquarie Questions Canadian Solar (CSIQ) Credibility; Downgrades & Slashes Price Target

Macquerie is clearly frustrated with Canadian Solar (CSIQ) and has cut its rating from Outperform to Neutral following the company’s guidance last night in which they indicated a forex hit and a bit of a margin contraction.  Maquerie says this 2nd negative revision in two quarters has “weakened its standing with investors” and “two strikes is enough.”  They have slashed their 1Q EPS estimate from .53 to .03 and the price  target from $35 to $23.

CSIQ is down big today (now about 15%) today and testing the Feb low around 18.41.  Some selling is certainly warranted but this feels like a bit of an overreaction.  A margin cut from the mid teens to 13% isn’t a big hit and the forex hit is likely a one time event as the CEO indicated they would be nearly fully hedged next quarter.  Although, they took a forex hit last quarter, so why didn’t they hedge for this quarter? 

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I decided to take on a trade in CSIQ around 18.50 as it appeared to stabilize intraday and has some support at the Feb lows at 18.41, but it’s taking out that level here and not showing signs of life.  I’ll have to close the trade out if it doesn’t close above 18.41 (at the the very least).  If it can’t hold the 18.41 level, it could very well take on the next level of support around the 15 level especially if the overall market begins to fall apart. 

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