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JPMorgan cuts Canadian Solar target to $14 from $20

Published 22/08/2024, 18:14
CSIQ
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On Thursday, JPMorgan (NYSE:JPM) adjusted its financial outlook for Canadian Solar Inc. (NASDAQ:CSIQ), reducing the price target to $14 from the previous $20 while maintaining an Underweight rating on the stock.

The firm's analyst cited Canadian Solar's second quarter performance, which showed revenue and gross margin figures in line with consensus, but a miss in earnings per share (EPS).

The persistent global module pricing weakness was noted as a continuing issue for the company's average selling prices (ASPs) and revenue, despite some compensation from the growth of its storage business.

Canadian Solar's third-quarter revenue and gross margin guidance fell short of expectations, even with a slightly more optimistic projection for module volumes. Additionally, the company's full-year 2024 revenue guidance has been revised downward.

Despite these challenges, Canadian Solar's U.S. operations are meeting internal expectations, and pricing is holding steady, which reflects the company's proactive approach to sharing the risk of potential new anti-dumping and countervailing (AD/CVD) tariffs.

The company's strategy for capacity expansion remains focused on modules, while plans to increase production of upstream cells, ingots, and wafers have been scaled back due to weaker pricing in those markets. This shift indicates Canadian Solar's commitment to maintaining profitability amid market pressures.

JPMorgan has consequently lowered its estimates and also reduced the multiple used in its price target methodology, signaling that the stock may continue to face headwinds until there is clearer visibility into pricing improvements. The revised price target is set with a December 2025 horizon.

In other recent news, Canadian Solar Inc. reported a robust second quarter for 2024, with solar module shipments reaching 8.2 gigawatts and revenues hitting the $1.6 billion mark. The company's gross margin stood at 17.2%, indicating a strong position in the clean energy market, driven by the expansion of AI-driven data centers, electric vehicles, and other emerging technologies. Canadian Solar's diversified business model, including a rapidly expanding energy storage segment, is expected to contribute to future growth.

The company's guidance for the third quarter includes expected solar module shipments of 9 to 9.5 gigawatts and battery energy storage shipments of 1.4 to 1.7 gigawatt hours.

The full-year revenue is projected to be between $6.5 billion and $7.5 billion. Canadian Solar's project pipeline includes 27 gigawatts of solar and 63 gigawatt hours of battery energy storage, expected to generate substantial revenues starting in 2025.

Despite anticipation of lower gross margins in the third quarter, a healthy margin in the US module market is expected to continue through the third and fourth quarters.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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