Canadian Solar Inc. (NASDAQ:CSIQ)
Canadian Solar is due to report its 4Q16 earnings on March 9, which might provide clues about how 2017 could turn out to be for the company. In 2016, the company struggled with tepid demand for solar panels because of a shortage of incentives to solar buyers from governments. Additionally, oversupply of panels led prices lower, making it difficult for panel manufacturers to meet their growth projections.
As a result, Canadian Solar Inc. (NASDAQ:CSIQ) posted downbeat earnings for 3Q16, its most recent quarterly report. Revenue of $657.3 million came short of consensus estimate by $28 million. Furthermore, the revenue declined 23% from a year earlier. Soft demand for panels and weak pricing environment contributed to the revenue shortfall.
The troubles in the solar industry in 2016 were also responsible for the nearly 60% drop Canadian Solar’s share price in the year. However, in what signals a positive start to 2017, shares of Canadian Solar Inc. (NASDAQ:CSIQ) are already up more than 25% so far this year. The stock rose nearly 9% to $15.36 in the last session.
Hope for a better 2017
The gains in the stock seem to stem from investors growing more optimistic that 2017 will be a better year for Canadian Solar Inc. (NASDAQ:CSIQ). Part of the reason for optimism comes from expectations that Canadian Solar will find good market for the various projects it has earmarked for sale.
Instead of creating a yieldco, Canadian Solar said it would monetize about $2 billion worth of project assets. It has sold several projects already, including recent sale of three utility-scale solar farms to a unit of Fengate Real Asset Investments. The transaction involving the three solar farms was valued at more than $195 million. Canadian Solar said gains from the transaction will be reflected in its 1Q17 results.
The sale of the assets will yield cash that Canadian Solar can funnel to more growth in 2017 or distribute to shareholders. The cash injection from assets monetization would also ease pressure on Canadian Solar in case recovery in solar industry remains slow in 2017.
Though 2016 was a tough year for solar companies, solar power industry is expected to continue growing thanks to regulatory requirements around greenhouse emissions. Falling panel prices is also expected to encourage uptake of solar power system, leading to more demand for Canadian Solar Inc. (NASDAQ:CSIQ) products and projects.
|Last Price a/o, 4:02PM EST||$ 15.36|
|Average Volume (mlns)||1.27|
|Market Cap (mlns)||$ 837.89|
|Shares Outstanding (mlns)||54.55|
|Share Float (mlns)||45.25|
|Short Interest Ratio||4.4|
I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.
About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.