Canadian Solar Hoping To Buck Ugly Earnings Trend

CSIQ reports earnings before the open on Monday

by Patrick Martin

Published on Mar 16, 2018 at 12:26 PM
Updated on Jun 24, 2020 at 10:16 AM

Solar stocks are in the news today, after GTM Research slashed its U.S. solar power installations forecast in the wake of President Trump's solar panel tariffs. In addition, brokerage firm UBS weighed in on several solar stocks, including initiating coverage on Canadian Solar Inc. (NASDAQ:CSIQ) with a "sell" rating and $15 price target. The analyst noted a preference for companies with "differentiated products and zero debt." Canadian Solar is slated to report fiscal first-quarter earnings before the open on Monday, March 19, giving us an opportunity to look at recent options activity on the energy issue. 

Taking a quick step back, the security has had a negative earnings reaction in five straight quarters, including a nearly 11% single-day drop in November. This time around, the options market is pricing in a larger-than-usual 10.1% one-day move, per implied volatility (IV) data.

Looking at the charts, CSIQ hit an annual high of $19.09 on Nov. 6, before pulling back to its 320-day moving average. The shares have struggled to rebound from there in 2018, and have lately met resistance at their 180-day moving average. At last check, the stock was down 1% to trade at $15.58, on pace for a fourth-straight loss. 

CSIQ ep

Despite UBS' stance today, many analysts are still in the bullish camp ahead of earnings. Exactly 40% of brokerages covering CSIQ rate it a "strong buy," and the stock's average 12-month price target of $19.84 represents expected upside of 27.5% to its current perch. Another earnings disappointment could prompt more downgrades and/or price-target cuts. 

In the options pits, speculative players have shown a stronger-than-usual interest in long put over calls. According to International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) data, the 10-day put/call volume ratio is 0.94, which registers in the 75th percentile of its annual range.


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