Stock版 - U.S. Clean Technology: Solar Q4 Earnings Calendar: Beat/Raise and Beta Chase? |
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发帖数: 152 | 1 We expect solar companies to report strong Q4 results and provide Q1/2011
guidance generally above consensus. Although set-up may appear to be less
favorable for a positive earnings season trade given the recent move seen in
the solar space, we see room for further near-term upside. We believe most
of the recent move was driven by short covering as opposed to real buying.
As the near-term policy backdrop for the sector continues to improve and as
the broader equity markets continue to grind higher, we expect positive
share price momentum for high beta solar stocks to continue even beyond the
earnings season.
Q4 earnings season - why could this time be different? Solar stocks have
historically traded off strong results (recall Q3 earnings season?) as
investor attention has typically changed from "anticipation of positive news
/earnings" to the next set of negative fundamental/policy catalysts. This
time around however, we see limited policy risks (in Germany, Italy) and
also do not anticipate any negative fundamental data points at least until
late Q2 timeframe. Layer in relatively attractive valuations (stocks still
trading at 6-8x conservative 2011 EPS) and we see room for another
significant upside from current levels. Our thesis may not work if the
broader equity markets get weaker, the euro depreciates or if Italy
announces major policy changes.
Beat/raise priced in? Skeptics would argue that the recent move is in
anticipation of beat/raise and perhaps the last round of positive estimate
revisions for the sector. We agree that solar stocks tend to be highly
correlated (at least directionally) to earnings momentum. That said, we
believe significant room for further upside to earnings exists if 2H volume/
pricing environment turns out to be better than expected.
Top 3 key themes to expect during Q4 solar earnings season: (i) Expect
another round of positive estimate revisions - stocks with flexible business
models (TSL, CSIQ) and access to low cost poly could be in a better
position to deliver earnings upside, (ii) Multiple expansion could continue:
Solar stocks may be up over the past few weeks, but are still trading ~25%
below recent average P/E multiples, (iii) Focus could shift from supply
increase (during Q3 earnings) to demand (we expect companies to talk about
demand strengths in Italy, US). We expect consensus 2011 demand estimates to
move up, (temporarily) mitigating oversupply concerns.
Key picks into Q4 earnings season: We prefer upstream solar stocks (WFR, SOL
) and vertically integrated Chinese solar stocks (TSL, STP). Low cost
Chinese solar companies such as CSIQ and YGE also stand to benefit from near
term investor optimism. |
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