May 14, 2008
Knobias Clip Report (05-13-2008)
By admin
Submitted By Knobias ClipReport
CSIQ: Earnings Cause Solar Rally but Quake May Have Impacted Supply
Tuesday’s session saw a perfect storm present itself after oil reversed earlier losses and set another new all time record. Reports indicated that the US Senate defeated a Republican plan to open new domestic areas to oil drilling but the highs saw a pullback after the Senate did approve a plan to stop filling the Strategic Petroleum Stockpile until prices fell below $75 per barrel.
With the price rise in oil, the solar sector would have come into play. But with Canadian Solar Inc. (CSIQ) reporting better than expected earnings, the sector saw a huge rally on the day.
Canadian Solar reported net revenues for the quarter of $171.2 million (including $2.2 million of silicon material sales), compared to net revenues of $17.5 million for the first quarter of 2007 (including $2.8 million of silicon materials sales) and $127.5 million for the fourth quarter of 2007 (including $2.4 million of silicon materials sales). Net income for the quarter was $19.0 million, or $0.61 per diluted share, compared to a net loss of $3.9 million, or $0.14 per diluted share, for the first quarter of 2007 and net income of $5.9 million, or $0.21 per diluted share, for the fourth quarter of 2007. If share-based compensation expenses of $2.2 million were excluded, non-GAAP net income for the quarter would have been $21.2 million, or $0.65 per diluted share.
The significant upside was mainly contributed by three factors — strong pricing, the strong Euro vs. USD, and their internal cost cutting. The Company noted that the large foreign exchange gain was likely a one-time event, but they believed that the other factors would remain positive which would help them maintain a similar level of profitability going forward.
Following the report and the oil rally, shares of Canadian Solar soared over 25% which caused many other names in the sector to see increased buying as well. CSUN (+9%), EMKR (+9%), FSLR (+4.5%), and JASO (+4.3%) were all higher on the day.
But as many already know, China has experienced a devastating earthquake which was centered just north of the Sichuan provincial capital Chengdu in central China, destroying urban areas and mountain villages. In a research note, Caylon Securities felt that the massive quake may have impacted many polysilicon producers. Polysilicon plants in the region, however, did not experience structural damage.
But with the more than 10,000 estimated lost in the tragedy, workers would be lucky to have not experienced a loss in their immediate family and friends. Solar cell makers who may have been impacted from suppliers in this region include Yingli Green Energy Holdings (YGE), Solarfun Power Holdings (SOLF), and possibly Suntech Power Holdings (STP). Shares of YGE were up 3.75%, SOLF was up 6.7%, while STP was up 6%. With more news reports regarding the damage from the Chinese quake, investors would be wise to follow these names for any news of disrupted polysilicon supply.
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