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Monday, November 10, 2008 1:04:51 PM
NEWS Solar Downgrades 42 minutes ago November 10, 2008, 10:29 am
CSIQ, ENER, FSLR, SPWR: Deutsche Bank Downgrades
Posted by Eric Savitz
In the latest sign that that the Street has become concerned about the near-term outlook for the solar sector, Deutsche Bank analyst Steve O’Rourke this morning cut his ratings on Canadian Solar (CSIQ), Energy Conversion Devices (ENER), First Solar (FSLR) and SunPower (SPWRA) to Hold from Buy.
He cites some of the same issues other analysts have recently noted in turning more cautious on the group:
Rising cost of capital. He calculates that a 1% increase in the cost of capital for a commercial scale project would require a 7% reduction in system price to maintain constant ROI.
Reduced access to capital. Projects which require third-party financing are at risk of being delayed or canceled.
Declining fossil fuel costs pushes out grid parity.
Worsening 2009 macro environment could cause some governments to reassess solar incentive programs.
Strengthening of the dollar against the Euro.
Significant module price declines likely in 2009. He sees ASPs down 22%-30%.
“While there were arguably better spots to step out of solar PV company stocks earlier in the fall, several factors…have helped spur appreciation in some names off of recent lows,” he writes. “We were lax to step out of solar PV stocks anticipating an Obama win in early November, and while timing may not be perfect, we believe appropriate positioning for [the first half of 2009] would be reduced exposure to the group.”
His new price targets for the downgraded stocks:
Canadian Solar: $12, down from $36.
Energy Conversion Devices: $41, down from $75.
First Solar: $160, down from $200.
SunPower: $45, down from $62.
In today’s trading:
Canadian Solar is up 12 cents, or 1.4%, to $8.53.
Energy Conversion Devices is down $2.31, or 6%, to $35.78.
First Solar is down $5.68, or 4%, to $143.99.
SunPower is down 27 cents, or 0.8%, to $33.59.
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