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On Friday, Roth/MKM analysts revised their outlook on Canadian Solar Inc. (NASDAQ:CSIQ), downgrading the stock from a "Buy" to a "Neutral" rating, while also significantly reducing the price target from $15.00 to $9.00. The downgrade reflects growing concerns over the company’s core module business and the impact of recent tariffs. According to InvestingPro data, despite a significant 24% surge in the past week, CSIQ’s stock remains down over 30% in the last six months, trading at just 0.22 times book value.
Analysts at Roth/MKM highlighted that Canadian Solar’s core module business has faced challenges over the last 18 months due to a global oversupply. Despite these challenges, the firm had maintained a "Buy" rating, largely on the strength of Canadian Solar’s storage outperformance. However, the imposition of a 145% tariff by China has introduced new uncertainties and risks to the company’s storage economics. InvestingPro analysis reveals concerning fundamentals, including a high debt-to-equity ratio of 1.87 and weak gross profit margins of 16.7%.
The analysts expressed caution regarding the potential outcomes of upcoming anti-dumping and countervailing duty (AD/CVD) decisions. They noted that these uncertainties, combined with the persistent oversupply in modules and risks associated with further enforcement of tariffs (FEOC/tariff risks), have prompted them to revise their stance on the stock.
The adjusted price target of $9.00 from the previous $15.00 reflects a more conservative valuation of Canadian Solar’s prospects. The analysts’ statement indicated that while there might be a reevaluation of their position if the China tariffs are removed, the current environment warrants a neutral position due to the lack of a clear resolution to the oversupply issue and the upcoming AD/CVD decisions.
In other recent news, Canadian Solar Inc. reported its fourth-quarter 2024 earnings, revealing a significant miss on earnings per share (EPS), which came in at -$1.47 compared to a forecast of -$0.03. However, the company’s revenue exceeded expectations, reaching $1.67 billion against an anticipated $1.64 billion. Despite the EPS miss, Canadian Solar’s stock saw a modest increase following the earnings release. The company is focusing on margin protection and strategic manufacturing investments amid a challenging market environment. Meanwhile, Oppenheimer adjusted its financial outlook for Canadian Solar, reducing the price target from $25.00 to $23.00 but maintaining an Outperform rating. The firm cited a significant drop in solar module spot prices and ongoing U.S. policy uncertainties as contributing factors. Additionally, Citi highlighted the impact of recent trade rulings, noting a substantial increase in tariffs for Canadian Solar, which could affect its competitive position and financial performance. These developments underscore the evolving challenges and opportunities within the solar industry.
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