CSIQ - Canadian Solar: Rising Chinese Production Pushes Global Market Into Glut

2024-05-14 17:53:44 ET

Summary

• Canadian Solar Inc.'s stock has lost around 15% of its value since I covered it last, reporting poor EPS and negative cash flows.
• The company's significant presence in China poses risks due to labor issues and the differing country's legal rights to assets for foreign investors.
• With stagnating demand and high financing costs, the global solar market is struggling, creating a growing solar panel glut that may last years.
• Canadian Solar's solvency and liquidity profile appears poor but is subject to unique benefits and risks associated with its operational focus in the PRC.
• With Canadian Solar's market capitalization reduced, it may need to accelerate equity sales to offset its significantly negative free cash flow.

In October of last year, I published "Canadian Solar: EPS Outlook Plummeting On Solar Glut And China Risks," highlighting my moderately bearish outlook for the solar panel producer Canadian Solar Inc. ( CSIQ ). Since then, the stock has lost around 15% of its value while reporting poor EPS and increasingly negative operating cash flows. In the article, I argued that this was likely to occur due to labor issues in China and falling demand for solar in most of the world. Although the decline in solar demand may prove temporary, I argued that its financial issues could be significant enough to create long-term problems for the firm....

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