Canadian Solar (CSIQ) shares are trading lower this morning after Collins Stewart analyst Dan Ries cut his rating on the stock to Hold from Buy on concerns about the impact on margins of rising solar cell prices.
“Strong demand has led to a firming of module prices,” he say. But Ries adds that module demand is so strong that it is now pulling up prices for solar cells and wafers; he thinks higher cell prices could weigh on CSIQ’s Q2 margins. Ries cuts his 2010 EPS forecast to $1.72, from $1.82.
“It will be difficulty for CSIQ to outperform in a period in which it is likely to have negative earnings revisions and miss Street expectations,” he writes. “While CSIQ’s flexible vertical integration strategy has advantages, it is not optimal when material prices are rising faster than module prices. Vertically integrated vendors are better structured to handle the current market conditions.”
CSIQ is down $1.19, or 5.4%, to $20.90.
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