Analyst Picks and Pans: Solar Stocks, Salesforce.com, McDermott
Solar energy stocks
Jefferies & Co. downgrades eight names
Jefferies & Co. lowered its ratings on eight solar companies on Aug. 21, citing numerous risks that could play out in the coming months, including a continuation of falling prices.
In reports to clients, Jefferies noted that a continued downward spiral in pricing, while accompanied by lower production costs, may lead to weaker-than-expected estimates for 2010 and concerns about value destruction in the solar sector. "Liberal Chinese lending practices encourage overproduction and capacity expansions in a market that needs rationalization, in our view," Jefferies analyst Paul Clegg said.
Evergreen Solar (ESLR) was downgraded to underperform from buy. Jefferies also lowered its price target to $1 from $3.
First Solar (FSLR) was downgraded to hold from buy. Jefferies also lowered its price target to $130 from $200.
Solarfun Power Holdings (SOLF) was downgraded to underperform from hold and the price target was cut to $4 from $6.
Energy Conversion Devices (ENER) was downgraded to underperform from hold and the firm set a price target of $8.
Ascent Solar Technologies (ASTI) was downgraded to underperform from hold. Jefferies said its $4 price target reflects increased investor risk tolerance.
China Sunenergy Co. (CSUN) was downgraded to underperform from hold and Jefferies trimmed its price target to $3.50 from $4.
SunPower (SPWRA) was downgraded to hold from buy and its price target was lowered to $30 from $35. Jefferies said SunPower's diverse and flexible business model bodes well for its market-share prospects in a recovery.
Suntech Power Holdings (STP) was downgraded to underperform from hold and its price target was trimmed to $12 from $14. "STP is positioned to generate rapid growth in key (markets) and to remain a leader on cost and quality," Jefferies said.
Janney Montgomery Scott raises price target Shares of Salesforce.com jumped in pre-market trading Aug. 21 after its second-quarter results beat expectations and the maker of sales management software raised its full-year outlook.
Analyst Sasa Zorovic at Janney Montgomery Scott said the results showed strong execution of Salesforce.com's business plan. It's benefiting from the trend toward software hosted by the provider and accessed through the Web, as opposed to software that's installed on the client's computers.
For the three months ended July 31, the San Francisco-based company posted earnings of $21.2 million, or 17 cents per share, up from a profit of $10 million, or 8 cents per share, in the same period a year earlier. Revenue rose 20% to $316.1 million from $263.1 million.
For the full year, the company raised its forecast to earnings of 60 cents to 61 cents per share on sales of $1.27 billion to $1.28 billion. Analysts had been expecting a profit of 60 cents per share on sales of $1.26 billion.
Zorovic raised his price target on the stock from $41 to $44 based on the forecast, but since the stock is already trading higher, maintained his neutral rating.
McDermott International (MDR)
KeyBanc maintains buy
McDermott International Inc.'s nuclear business is drawing more attention from investors and utilities, KeyBanc analyst Tahira Afzal said Aug. 21.
Following a meeting with executives of the engineering and construction firm, Afzal said McDermott outlined four utilities that are showing strong initial interest in nuclear power and "the color provided was more positive than we expected."
Afzal said she sees some possible awards in the fourth quarter of 2009 and early next year "and possible earnings upside into early 2010."
Afzal expects 2009 earnings of $1.66 per share estimates profit of $2.23 per share in 2010. But near-term bookings "remain lumpy" at McDermott's J. Ray McDermott business, which does engineering, construction, installation and project management for offshore oil and gas construction projects. The company believes bidding and pricing will remain stable, Afzal said.
McDermott also believes bidding will increase moderately in its power generation business, and sees a "consistent trend" within its government operations business, Afzal said. She has a $33 price target on the company's shares.