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HSBC analyst has upgraded shares of Daqo New Energy (NYSE: NYSE:DQ) from Hold to Buy, setting a price target of $29.30.
The upgrade is based on expectations of the company's net loss reaching $71 million, which is attributed to an increase in the N-type product shipment mix with better margins.
Daqo New Energy, a leading manufacturer of high-purity polysilicon for the global solar PV industry, is anticipated to see both production and shipment volumes rise. According to HSBC's analysis, the company's quarterly production and shipment volumes are expected to hit 44kt and 40kt, respectively.
In other recent news, Daqo New Energy reported a net loss of $120 million in its second-quarter earnings for 2024, a result of falling market prices and a substantial non-cash inventory impairment expense.
Despite this, the company has maintained a robust financial position with a cash balance of nearly $1 billion and a combined cash and banknote receivable balance of $1.1 billion. JPMorgan maintained its Overweight rating and $23.00 price target on Daqo New Energy's shares, highlighting its industry-leading net cash position of $2.4 billion and status as a cost leader.
However, Roth/MKM adjusted its outlook on Daqo New Energy, reducing the price target from $23.00 to $15.00, but maintaining a neutral rating on the stock. This adjustment comes in the wake of the reported earnings miss and a downward revision of the company's 2024 guidance.
Daqo has also commenced initial production at its Phase 5B polysilicon project, exceeding production volume expectations for the quarter. However, current polysilicon prices are reported to be below cash costs, which might delay the company's return to breakeven levels until mid-2025.
InvestingPro Insights
Recent data from InvestingPro provides additional context to HSBC's upgrade of Daqo New Energy (NYSE:DQ). The company's market cap stands at $1.37 billion, with a price-to-book ratio of 0.32 for the last twelve months as of Q2 2024, aligning with the InvestingPro Tip that DQ is "Trading at a low Price / Book multiple." This low valuation could support HSBC's bullish stance on the stock.
However, investors should note that DQ's revenue growth has been negative, with a -53.47% decline in the last twelve months as of Q2 2024. This is consistent with another InvestingPro Tip stating that "Analysts anticipate sales decline in the current year." Despite these challenges, the stock has shown resilience, with InvestingPro data indicating a strong 41.27% price return over the last three months.
For those seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Daqo New Energy, providing a deeper understanding of the company's financial health and market position.
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