Solar Stocks Are Hot, But CSIQ Is Hotter

by Aaron Levitt | November 13, 2013 11:27 am

Solar stocks are finally basking in the sun once again. New subsidies from key markets like China and Japan, as well as low module pricing, have taken hold over the last year or so. Plus, the number of PV installations has surged. As a result, solar stocks like Canadian Solar (CSIQ[1]) and First Solar (FSLR[2]) have been some of the best names, with the industry gaining about 141% this year.

solar panels Solar Stocks Are Hot, But CSIQ Is Hotter

But for CSIQ stock investors, the sun is shining even brighter — to the tune of a nearly 800% gain in 2013 so far. And yet the story at CSIQ continues to get better. The solar stock continues rack up new contracts, sell more modules and cut costs. All in all, that’s resulted in CSIQ reporting some of its best earnings in years.

So with all solar stocks looking strong and the situation at CSIQ continuing to get even better, Canadian Solar stock may be one of the best long-term buys for investors.

Yes, it may be time to put on some sunscreen and buy CSIQ stock.

First Profit for CSIQ in Eight Quarters

For Canadian Solar, the latest quarter[3] can be only seen as a major win for the solar stock. After years of struggling, CSIQ managed to report its first profit after eight quarters of losses. Overall, Canadian Solar earnings tallied 56 cents per share of CSIQ stock. That compares to a loss of 29 cents per share in the previous quarter of 2013. Revenue for the third quarter also increased by roughly 30% vs. the previous quarter and by 50% vs. the same period a year ago.

CSIQ also scored a major win on the amount of photovoltaic modules sold. The solar stock shipped 478 megawatts (MW) worth of capacity during the third quarter. An increase of 23 MW versus the previous quarter.

The key for CSIQ wasn’t just the number of solar modules sold, but also where they were installed.

For many solar stocks — like LDK Solar (LDK[4]) — Europe has been the traditional hot-spot for module sales. However, as austerity has gripped the region, PV subsidies have fallen by the wayside. That’s caused many solar stocks to hurt pretty hard since the financial crisis. For CSIQ, the focus has moved from Europe to new demand drivers in Japan and China.

CSIQ only relied on Europe for mere 9.5% of its sales. On the flipside, Emerging Asia accounted for nearly 43.6% of its total revenue. Shipments to the Japanese market alone represented almost 30% of the CSIQ total for the third quarter. That’s up from only about 5.7% a year ago. Likewise, CSIQ is seeing increases in Chinese demand for its panels and recently signed a deal to supply an additional 32 MW[5] worth of solar capacity for a new solar farm in the nation.

The other main driver for CSIQ has been its shift from being just a panel producer to one that also focuses on utility-sized installations.

Following the lead of thin-film pioneer First Solar (FSLR[2]), CSIQ continues to rack-up more contracts and sales in this business segment. During the quarter, Canadian Solar closed on the sale of two solar power plants in Ontario to oil and gas midstream company TransCanada (TRP[6]) for $95 million. At the same time, CSIQ increased its total utility-scale project pipeline to approximately 1,015 MW. Again, the bulk of those projects are located in energy hungry and subsidy friendly China and Japan.

That newfound focus on utility-sized projects has given CSIQ an edge over other solar stocks in the earnings department. For example, PV module only manufacturer Yingli Green Energy (YGE[7]) fell hard when its earnings reported disappointed investors, as sales didn’t come meet expectations.

CSIQ has managed to avoid many of those issues and utility-scale installations going forward should contribute greatly to the company’s renewed profits.

A Bright Future at CSIQ

For CSIQ — arguably the hottest solar stock — the previous quarter could be the start of something very big.

Unlike many of its rivals, CSIQ has managed to survive and thrive the shake-out among solar stocks. By shifting its focus from just selling modules to also building grid-scale solar arrays, Canadian Solar stock could be one of the best long-term winners for investors. That “total solutions” business provides plenty of scalability and higher margins, while rising demand in emerging Asia will ultimately be the main driver for CSIQ stock going forward.

Sure, CSIQ stock isn’t “cheap” considering the solar stock has risen about 950% over the last 12 months. However, it could be a bargain now that it has focus and profitability under its belt.

For investors, the time to buy CSIQ stock could be on.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

Endnotes:
  1. CSIQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSIQ
  2. FSLR: http://studio-5.financialcontent.com/investplace/quote?Symbol=FSLR
  3. the latest quarter: http://finance.yahoo.com/news/canadian-solar-reports-third-quarter-100000296.html
  4. LDK: http://studio-5.financialcontent.com/investplace/quote?Symbol=LDK
  5. additional 32 MW: http://www.bloomberg.com/news/2013-11-12/canadian-solar-to-supply-32-megawatts-of-panels-for-china-plant.html
  6. TRP: http://studio-5.financialcontent.com/investplace/quote?Symbol=TRP
  7. YGE: http://studio-5.financialcontent.com/investplace/quote?Symbol=YGE

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