Sell your Canadian Solar stock, Citi says

Following the company’s fourth quarter results, Citi analyst Vikram Bagri has cut his price target on Canadian Solar (Canadian Solar Stock Quote, Chart, News, Analysts, Financials NASDAQ:CSIQ).

On March 25, CSIQ reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Net Income of $34.0-million on Net Revenue of $1.5-billion, down 11%, year-over-year.

“2024 was a challenging year for the solar industry, with intense competition and ongoing policy and trade-related uncertainties creating operational and financial headwinds,” Dr. Shawn Qu said. “Despite these industry-wide pressures, our modules business executed targeted strategic adjustments, enabling us to maintain relatively stronger profitability compared to the broader market. The industry and Canadian Solar are undergoing a transition. While near- to mid-term uncertainties persist in the solar market, demand for energy storage is accelerating. Storage is increasingly compelling, both in stand-alone applications and when paired with solar, driven by growing energy demand from sectors such as data centers and electric vehicles. Finally, we remain fully committed to the U.S. market and continue to advance our manufacturing expansion across three facilities dedicated to solar modules, solar cells, and energy storage solutions.”

Bagri summarized the quarter and the outlook for Canadian Solar.

“Module and Storage shipments were largely in-line with outlook, while GM [gross margins] was 270 basis points below guidance,” Bagri wrote. “Management indicated storage margins were 20 per cent or more in 4Q despite ASP pressure, so the margin miss is primarily impairment- and tariff-driven. Lower storage shipments of 0.8GWh in 1Q will result in GM declining to 10 per cent, the lowest start to the year for CSIQ since 2018. That said, higher storage shipments, better China module pricing in 1H, and greater U.S. domestic content mix are expected to drive sequential improvement in GM this year. We model FY25 revenues of $6.3-billion vs. $7.8-billion guided given intense competition in storage and as China module market is likely to face pressure in 2H. We see negative read throughs for FLNC given CSIQ storage backlog indicates ASP of roughly $133/KWh compared to recent bookings at $181/KWh for FLNC.”

As reported by The Globe and Mail, Bagri March 26 maintained his “Sell” rating on CSIQ and cut his price target from $12.00 to $11.00.