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Goldman Sachs Expects Solar Names To Fall Short Of Expectations In Q3, Election Could Be 'Bigger Catalyst'

Most Solar companies are likely to miss expectations in Q3, “extending the challenging setup for stocks that has persisted recently,” Goldman Sachs’ Brian Lee said in a report. He added, however, that the upcoming US election and the disparity in the views on climate change of the leading candidates could offset company specific issues and act as a bigger catalyst.

Sunrun

Naming Sunrun Inc RUN 7.53% as a top Q3 idea, analyst Lee maintained a Buy rating on the company, with a price target of $10. He mentioned that Sunrun was “best setup to beat on costs/share gains.”

Sunrun could deliver an EPS beat, with a figure of ($0.01), versus consensus expectation of ($0.10) on lower costs and in-line volumes, since the company appears “best positioned to capitalize on the current cycle that has sent input prices sharply lower in 3Q.” the analyst wrote.

The company may report an 8 percent sequential decline in all in-costs, also backed by a better mix. The commentary on share gains and cash flow is likely to be positive.

SolarEdge

Lee maintained a Sell rating on Solaredge Technologies Inc SEDG 1.94%, with a price target of $13. Although EPS could be ahead of expectations, there is more risk to the guidance, with checks suggesting “growth is not accelerating into year-end and mix could be weaker (slower HDWave uptake).”

First Solar

The analyst maintained a Neutral rating on First Solar, Inc. FSLR 1.06%, with a price target of $42. He expects the company to report its Q3 EPS at $0.40, missing consensus of $0.74, with a higher mix of overseas volumes weighing on margins.

“For 2016, we see a push-out of Stateline taking EPS guide down ~$1 to a mid-point of ~$3.25 with low visibility on 2017 persisting owing to lack of new systems bookings in 2H,” Lee wrote.

SolarCity

Lee maintained a Neutral rating on SolarCity Corp SCTY 1.37%, with a price target of $25. He expects the company to report its Q3 volumes at 165MW, below the guidance of 170MW guide. Another reduction in full-year guidance seems likely, “given financing challenges and operational disruption ahead of the proposed Tesla deal.”

Although focus would be on the shareholder vote, “we see potential Silevo liability as a new investor concern,” the analyst commented.

SunPower

The analyst reiterated a Neutral rating on SunPower Corporation SPWR 2.86%, with a price target of $9. He expects the company to post Q3 adj. EBITDA at $120 million, short of the consensus estimate of $124 million. SunPower’s Q3 results were likely impacted by module ASP headwinds, which were only partially offset by large project completions.

Vivint Solar

Lee maintained a Neutral rating on Vivint Solar Inc VSLR 6.06%, with a price target of $ $3.50. The company would likely report broadly in-line results, with EPS of ($0.43) missing consensus expectations of ($0.46). “Near-term growth to remain muted, however, on lack of tax equity.”

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DateFirmActionFromTo
Oct 2016Axiom CapialInitiates Coverage OnSell
Oct 2016Goldman SachsDowngradesNeutralSell
Sep 2016Canaccord GenuityAssumesBuy

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