On Monday, Daqo New Energy Corp (NYSE:DQ) had its price target reduced by investment firm Jefferies to $34.05, down from the previous target of $38.40. Despite the reduction, the firm has maintained a Buy rating on the stock.
This adjustment follows Daqo's reported second-quarter financial results for 2024, which included a net loss of $120 million, compared to a net profit of $16 million in the first quarter of 2024 and $104 million in the second quarter of 2023.
The net loss for the quarter was primarily attributed to a $108 million impairment. The production volume for the company exceeded its guidance, coming in at 65 kilotons compared to the expected range of 60-63 kilotons.
However, sales volume decreased to 43 kilotons from 54 kilotons in the previous quarter. By the end of the second quarter, Daqo New Energy had accumulated an inventory of 28 kilotons.
Despite the loss, Daqo New Energy saw a quarter-over-quarter improvement in production costs, which dropped to $6.19 per kilogram from $6.37 per kilogram in the first quarter of 2024. In response to the current market conditions, where the market price is below the cash cost, the company has revised its full-year 2024 production volume guidance downwards from the initial range of 280-300 kilotons to a new range of 210-220 kilotons. For the third quarter of 2024, the company expects to produce between 43 and 46 kilotons, as part of a strategy to preserve cash.
In other related news, Daqo New Energy Corp. revealed disappointing Q2 results, which fell short of analyst expectations. The company reported a loss of $1.50 per American Depositary Share (ADS), and revenues were recorded at $219.9 million, significantly lower than the consensus estimate of $337.13 million. This was largely due to a sharp decline in polysilicon prices during the quarter, which resulted in a gross loss of $159.2 million.
Daqo also reported a $108 million inventory impairment expense as market values fell below book values. Despite this, the company maintained a strong balance sheet with $997 million in cash and no financial debt at the end of the quarter.
In light of recent developments, Daqo has revised its full year 2024 production volume guidance to 210,000-220,000 metric tons, a downgrade from previous expectations due to current market conditions.
Despite facing near-term challenges, the management remains optimistic about the long-term growth prospects for solar energy.
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