The solar industry has become
extremely competitive over the last few years. The primary reason was a decline
in polysilicon prices that led to Chinese solar manufacturers adding to their
production capacities (to benefit from declining raw material prices). The
result was an excess supply of solar cells that led to a massive decline in
solar ASPs and hitting the bottom line of solar companies. In this scenario, we
are recommending investors to take long positions in MEMC Electronic (WFR) and
SunPower Corporation (SPWR) based upon the respective following key points:
MEMC Electronic:
- MEMC has shown impressive revenue growth of 78% in the
second quarter, led by strong demand from uncertain European markets.
- The stock has shown an upward movement of 30% over the
course of the last three months, and has significant potential to show a
further upside.
- The drastic increase of 120% in the PV Industry in
1H2012 makes it a good prospect to take advantage of ongoing increasing
demand in the United States.
- The stock is trading at low valuations, as compared to
its peers in the industry.
- Its earnings will grow by 280% by the end of FY2013, according
to 16 analyst estimates.
- The company has significant potential to capture
growing demand in emerging solar markets in the U.S., India and China.
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