The following excerpts explain why Zacks power sector analyst Jon Kolb remains neutral on Canadian Solar, Inc. (CSIQ), the alternative energy company:
'CSIQ's precipitous decline following its November 2006 initial public offering (IPO) ought to reverse course as improving fundamentals support a higher valuation. Going forward, solar panel sales growth in various global markets, in-house solar cell production ramp-up supported by material cost savings through the company's long-term supply agreement and silicon reclamation program should collectively generate significant earnings growth.
'As of the date of this report, CSIQ does not have a meaningful positive P/E multiple for the current year 2007, however, the stock trades at 13.9x our 2008 earnings per share estimate, which represents a significant discount compared to the alternative energy industry and its comparable peers, presenting opportunity for the share price to appreciate with forward P/E multiple expansion.
'However, as the company attempts to achieve consistent profitability, it does not yet maintain a significant stable customer base and net income is often adversely affected by frequent changes in product mix. Accordingly, we maintain our market-neutral Hold recommendation on CSIQ with a six-month target price of $11.50, representing annualized return potential of 10.1%.'
Read the full analyst report on CSIQ.
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