Standpoint Research Shines A Light On 2 Solar Stocks

Standpoint Research, an investment research firm, first evaluated shares of First Solar, Inc. (NASDAQ: FSLR) and Canadian Solar Inc. (NASDAQ: CSIQ) back in December 2014. On September 2, the analysts released a follow-up to their initial report, noting that after reinstating First Solar and Canadian Solar, the trades "have not gone well."

In fact, the analysts noted that out of the research firm's 48 recommendations issued to clients since the start of 2016, First Solar and Canadian Solar are the only two names to have moved more than 20 percent in the wrong direction. With that said, the research firm felt it prudent to initiate a new deep dive into the two companies to re-evaluate their positioning and outlook in a new research report.

Related Link: Argus Downgrades First Solar On Price Competition Concerns

"This is a cyclical industry and you want to buy these names when they are out of favor as they are now," the analysts wrote.

First Solar: Buy Recommendation, Price Target Of $54

First Solar's model offers PV (photovoltaic) solar energy solutions with "superior value and less risk" compared to its peers. For instance, the company introduced its Series 5 module technology in 2016 that "represents one of the greatest improvements" to existing module technology in the company's history.

The module contains a larger form factor and higher wattage but also reduces the number of electrical connections and hardware which results in "significant" labor and materials savings.

Meanwhile, First Solar shipped around 1.6 gigawatts of modules in the first of 2016, and the company has landed bookings worth 1.4 gigawatts, which indicates that its shipments and bookings are "moving at an almost identical pace." In addition, many new orders are being driven from international markets, many of which haven't been included in its bookings yet.

Canadian Solar: Buy Recommendation, Price Target Of $18

According to the analysts, global photovoltaic (PV) demand is expected to triple within the next 15 years, and Canadian Solar is " one of the companies that's poised to leverage the boom in solar overlooked by investors."

Canadian Solar is "growing very quickly," especially in China, India, the United States and other key markets. Despite its strong positioning, the company's stock is "valued quite cheaply," as bears argue that low oil prices reduce the demand for renewable forms of energy. Nevertheless, Canadian Solar's sales have grown at a 36 percent annual rate in the past five years while its earnings grew 46 percent.

Looking forward, Canadian Solar is focused on enhancing its cell efficiency, which will contribute to lowering its cost base and improving margins. The analysts suggested that the company's cell efficiency is expected to gain "impressive momentum" in the long run and improve until the end of 2018.

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