Biden's Inflation Act Is Paying Off. Analyst Sees 36% Upside For This Alt Energy Play
Canadian Solar Inc (NASDAQ: CSIQ) has been performing exceptionally well in the first half of 2022 as the stock performance is up roughly 34% year-to-date.
Canadian Solar Inc (NASDAQ:CSIQ) has been performing exceptionally well in the first half of 2022 as the stock performance is up roughly 34% year-to-date.
The Canadian solar power company saw 85% growth in revenue compared to the prior year's second quarter, totaling $2.31 billion and doubled its gross profit to $371 million, achieving a gross margin of 16%.
With second quarter revenues up 65% year-over-year, Canadian Solar was able to increase its gross margins by 101% year-over-year, enabling diluted net income expansion of $74 million from $11 million in the second quarter of 2021.
The company plans to grow its volume of project sales by a compound annual growth rate of approximately 50% to 2026, while holding and accumulating assets through investment vehicles such as new solar projects in order to better capture asset value.
After President Joe Biden’s Inflation Reduction Act passed Congress, alternative energy companies such as Canadian Solar will receive roughly $369 billion in energy tailwinds through various subsidies.
"We are also excited to see the Inflation Reduction Act, or IRA, in the U.S. coming into effect. We believe it will drive a big acceleration in demand for clean energy, especially for solar energy and battery storage," said Dr. Shawn Qu, Chairman and CEO.
With more liquidity entering the market in forms of government subsidies, alternative energy companies should be able to boost revenue in less capital intensive ways.
In the weekly Benzinga Pro Insider Report, analyst Gianni Di Poce said sales for full year 2022 could be set to grow by as much as 35%, as management reported a 45% uptick in module shipments and a 100% increase in battery storage shipments year-over-year.
Furthermore, Canadian Solar just won a large contract with the Chilean government to produce a 253 MWp solar, plus a 1,000 MWh battery energy storage project in the Antofagasta Region.
“I am bullish on CSIQ as long as the stock remains above $38.00-$39.00. Upside target $60.00-$62.00”, said Di Poce.
Nevertheless, the analyst mentioned that Canadian Solar has a fairly elevated short percentage float of 7.4%, which could lead to a modest short squeeze in the stock.
Technical Support: “Canadian Solar is consolidating above resistance after breaking out from a massive saucer pattern”, Di Poce mentioned. As the stock tests its resistance line looking for support, the price should trend higher if it holds above the resistance.
Other Analyst Ratings:
Goldman Sachs: Raised price target from $38 to $43
Citigroup: Raise price target from $40 to $45
JPMorgan: Maintains a neutral price of $42