After an unpredictable trading year in 2010, solar stocks appear poised for strong returns in 2011. P/E ratios on some leading Chinese solar stocks look more like the P/Es for value stocks, not shares in a high-growth industry. Barron’s reports that solar installations likely rose 70 percent last year. Still, shares in some leading solar stocks lagged far behind that pace last year as analysts felt solar panel producers would ramp up production to meet rising demand and keep costs low (which would result in lower profit margins for solar stocks).
Now, some investors are wondering if they took profits on solar stocks too soon. Shares in LDK Solar Co., Ltd. (NYSE:LDK), for instance, were up more than 18 percent yesterday on news that the company was raising its Q4 and 2011 forecast above analysts’ estimates.
In addition to LDK Solar, here are four other solar stocks to watch in 2011:
1) JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). My personal favorite right now (and a company I own shares in), JA Solar has one of the industry’s lowest P/E ratios at 7.4. The company was upgraded to a “buy” yesterday by Auriga Securities analyst Mark Bachman on what he perceives as too much investor pessimism in the solar industry. Many investors have forecast solar module prices falling lower than they likely will in 2011, Bachman tells Barrons. That’s got Bachman bullish on JA.
2) Canadian Solar Inc. (NASDAQ:CSIQ). With most of its manufacturing based in China, Canadian Solar is poised for bigger returns this year. It’s trading at a discount to pure Chinese solar stock plays, and it was also singled out by Bachman and upgraded to a “buy.” Late last week, Zacks Investment Research also upgraded CSIQ to “outperform” setting a $15 price target on the company’s shares. “The prospects for Canadian Solar look favorable based on a geographically-diversified customer base, ongoing capacity expansion programs, improving operating efficiencies, rising margins and material cost savings through its vertically-integrated production structure,” Zacks writes.
3) JinkoSolar Holding Co., Ltd. (NYSE:JKS). A relative newcomer on the NYSE, JinkoSolar started trading last May. The stock’s returned 132 percent since as the company has dramatically surprised to the upside on both its earnings releases so far. JinkoSolar will announce Q4 earnings on Feb. 7, and their November revenue guidance beat analyst estimates for the quarter by nearly $50 million.
4) Daqo New Energy Corp. (NYSE:DQ). A riskier, small-cap Chinese solar stock play, Daqo New Energy supplies polysilicon to Chinese solar companies and sells polysilicon on the spot market. After debuting on the NYSE with ADRs in October, Daqo plans to use its new-found cash to expand into producing solar wafers, modules and cells. Production should start early this year and could transform Daqo from a solar materials supplier into a full-fledged solar company. Daqo’s first earnings release is scheduled for Jan. 20 with analysts expecting earnings of $0.71 per share or $24 million on a market cap of $443 million.