Barclays on U.S. Clean Technology: Silver: Near-term Potential Headwind?
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Rating Summary:
12 Buy, 12 Hold, 5 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0
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Barclays on U.S. Clean Technology: Silver: Near-term Potential Headwind?
Barclays analyst says, "Solar companies saw modest earnings impact from silver price increases during the Q4 earnings season. However, we expect the impact to be more significant in Q1 and Q2 as silver prices have increased at a faster pace relative to initial expectations and most companies have likely worked through low-cost silver inventory in Q4'10. Our commodities team expects silver prices to increase modestly in the near term (silver prices have nearly doubled over the past 6 months), but decline in the longer term. We estimate the recent surge in silver prices to likely impact overall non-silicon cost structure by ~2-3c/W per quarter and potentially drive margin pressure for most solar companies. Cell/module suppliers (Canadian Solar (Nasdaq: CSIQ), Hanwha SolarOne (Nasdaq: HSOL), JA Solar (Nasdaq: JASO), China Sunenergy (Nasdaq: CSUN), JinkoSolar (NYSE: JKS) and Yingle (NYSE: YGE)) could see margin pressure and downside risk to guidance/consensus expectations. Suntech (NYSE: STP), Trina Solar (NYSE: TSL) and SunPower (Nasdaq: SPWRA) guidance already reflects some silver cost increase and as such, negative margin/earnings impact in Q1 could be limited."
"For CSIQ, we are currently modeling non-silicon costs to decrease by 2c/W in Q2 - potential exists for non-silicon costs to increase by ~2c/W in Q2. For CSUN, we see risk to management guidance of non silicon cost reduction over next few quarters. In the case of HSOL, non Si costs increased in Q4 partially due to higher silver cost. The company expects costs to decline by 5 to 10%, but noted that in the near term silver costs could act as a headwind. We are currently modeling flat non Si costs in Q1/Q2. Similarly, in the case of JASO, management has not guided to any cost increase - we are modeling flat non-Si costs in Q1/Q2. Finally, companies such as JKS and YGE have guided non-Si costs could decline every quarter in 2011 - we see risk to this guidance. Poly/wafer suppliers (Daqo (NYSE: DQ), RenaSola (NYSE: SOL), LDK Solar (NYSE: LDK) and MEMC (NYSE: WFR)) are not vulnerable to silver prices, in our view."
Barclays analyst says, "Solar companies saw modest earnings impact from silver price increases during the Q4 earnings season. However, we expect the impact to be more significant in Q1 and Q2 as silver prices have increased at a faster pace relative to initial expectations and most companies have likely worked through low-cost silver inventory in Q4'10. Our commodities team expects silver prices to increase modestly in the near term (silver prices have nearly doubled over the past 6 months), but decline in the longer term. We estimate the recent surge in silver prices to likely impact overall non-silicon cost structure by ~2-3c/W per quarter and potentially drive margin pressure for most solar companies. Cell/module suppliers (Canadian Solar (Nasdaq: CSIQ), Hanwha SolarOne (Nasdaq: HSOL), JA Solar (Nasdaq: JASO), China Sunenergy (Nasdaq: CSUN), JinkoSolar (NYSE: JKS) and Yingle (NYSE: YGE)) could see margin pressure and downside risk to guidance/consensus expectations. Suntech (NYSE: STP), Trina Solar (NYSE: TSL) and SunPower (Nasdaq: SPWRA) guidance already reflects some silver cost increase and as such, negative margin/earnings impact in Q1 could be limited."
"For CSIQ, we are currently modeling non-silicon costs to decrease by 2c/W in Q2 - potential exists for non-silicon costs to increase by ~2c/W in Q2. For CSUN, we see risk to management guidance of non silicon cost reduction over next few quarters. In the case of HSOL, non Si costs increased in Q4 partially due to higher silver cost. The company expects costs to decline by 5 to 10%, but noted that in the near term silver costs could act as a headwind. We are currently modeling flat non Si costs in Q1/Q2. Similarly, in the case of JASO, management has not guided to any cost increase - we are modeling flat non-Si costs in Q1/Q2. Finally, companies such as JKS and YGE have guided non-Si costs could decline every quarter in 2011 - we see risk to this guidance. Poly/wafer suppliers (Daqo (NYSE: DQ), RenaSola (NYSE: SOL), LDK Solar (NYSE: LDK) and MEMC (NYSE: WFR)) are not vulnerable to silver prices, in our view."
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