Stocks are higher this morning ahead of president-elect Biden’s inauguration later today. Following the ceremony, Biden plans to sign more than a dozen executive orders to address a litany of challenges. Many of Biden’s orders will reverse those issued by Trump, including the so-called Muslim travel ban and the construction of a southern border wall.
Perhaps the quickest and least controversial step that the new administration could take would be to de-escalate the trade wars the Trump administration started, with an eye toward lessening the pain these policies have caused for solar and clean energy.
The first to go should be the unprecedented tariffs the Trump administration imposed on imported solar cells and modules. These tariffs have levied a hidden, de facto tax on the entire industry, raising prices for solar power, slowing the industry’s growth, and turning U.S. allies and solar manufacturing hubs like Taiwan, South Korea and Canada (whose imports are also taxed) into collateral damage.
Today’s trade alert highlights a promising solar stock that stands to benefit from changes made by the new administration.
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Founded in 2001, Canadian Solar Inc. (CSIQ) is a leading manufacturer of solar photovoltaic modules and provider of solar energy solutions. The company operates primarily through two segments — Module and system solutions (MSS) and Energy. CSIQ has delivered roughly 52 GW of solar modules to thousands of customers in more than 150 countries through the end of 2020. This is sufficient to meet the clean, green energy needs of roughly 13 million households.
CSIQ gained 121% over the past six months based on its ability to overcome market challenges and to focus on executing its strategies. It closed yesterday’s trading session at $55.03, 7% below its all-time high of $59.19, which it hit on January 7, 2020. The stock is currently trading at a trailing-12-month P/S of 0.97x, which is much lower than the industry average of 4.19x.
The company reported impressive results for the third quarter ended September 30, 2020, with its solar module shipments exceeding guidance. Also, CSIQ took a major step forward during the third quarter with a successful pre-IPO equity raising by CSI Solar Co., Ltd., its MSS subsidiary. CSIQ’s geographical diversification, financial strength and price momentum have helped the stock earn a consensus “Buy” rating.
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The company’s top line has climbed 20.3% year-over-year to $914.4 million for the third quarter ended September 30, 2020, driven by higher module shipments and project sales. Total module shipments have increased 33% year-over-year to 3,169 MW. Its gross profit increased 21.2% sequentially to $178.4 million, yielding gross margin of 19.5%. And its EPS of $0.15 surpassed the consensus estimate by 400%.
On January 7, the company announced that its wholly owned subsidiary, Recurrent Energy, had completed the sale of the 144 MWac Pflugerville Solar project to Duke Energy Renewables, a subsidiary of Duke Energy Corporation (DUK). On December 22, CSIQ announced the sale of its remaining 30% ownership of the Big Fish SPV S.r.l. and Iron SPV S.r.l. solar projects to Falck Renewables.
The company’s net revenue has grown at a CAGR of 4.4% over the past three years, while its EBITDA increased at a CAGR of 40.5% over the same period. Also, its EPS has increased at a CAGR of 112.5% over the past three years. CSIQ had generated 30% growth in shipments since 2013 and has generated nearly $1.4 billion in cash since 2013.
CSIQ has the potential to advance in the upcoming months despite gaining more than 150% over the past year, based on its continued business growth, favorable earnings and revenue outlook, and favorable analyst sentiment.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for CSIQ. It has an average broker rating of 1.64, indicating favorable analyst sentiment. Moreover, CSIQ has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
The consensus revenue estimate of $4.93 billion for 2021 represents indicates 43.6% increase year-over-year. Its EPS is expected to grow 20.4% in 2021, and at a rate of 20% per annum over the next five years.
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