
Suntech Power Guides Above Street
NEW YORK (
) -- Shares of Chinese solar company
Suntech Power
(STP)
are leading solar returns on Monday morning after the company released full year 2010 and 2011 guidance higher than the Street consensus.
Suntech expects 2010 revenue of $2.78 billion to $2.83 billion, ahead of the Street target of $2.7 billion.
For 2011, Suntech expects to ship at least 2.2 gigawatts of solar products and generate revenues of $3.4 billion to $3.6 billion. The Street was estimating 2011 revenue of $3 billion.
Suntech Power shares were up close to 4% in early trading on Monday.
Ahead of the Suntech guidance announcement and its annual investor day on Monday, Auriga Securities had upgraded Suntech Power to a buy and set a price target of $11. Auriga analyst Mark Bachman also expected some short covering to occur after Suntech released its guidance.
"Short covering is likely imminent. Ahead of what we expect to be a bullish analyst day and signs of recovery from a low in margins, we expect heavily shorted STP will see a round of covering," wrote Bachman in a report ahead of the announcement. "We expect margin and EPS estimate increases after the analyst day, both of which normally lead to higher stock prices and work against a short position."
Bachman moved to a buy on Suntech Power, but didn't expect a gargantuan spike in share price to set the trend for the stock, also stating that, "While we do not expect negative sentiment to turn on a dime and lead the stock racing higher, we do expect the stock to creep higher from here."
Suntech Power also included upside in its gross margin forecast for 2011, pegging a range of 20% to 22%. The Auriga analyst noted that 20% gross margin has been the norm in years past but increasing vertical integration for Suntech Power could lead to gross margin as high as 22%, particularly due to wafer production.
Suntech expects to achieve 1.2GW of installed wafer capacity by the end of 2011, up from 500 megawatts this year. Suntech expects to achieve 2.4GW of installed cell and module production capacity by the end of 2011 up from 1.8GW this year.
Suntech also announced a joint venture with Wuxi Industrial Development Group and Wuxi New District E&D Group to own and operate a 1.2 GW solar cell production plant. Suntech will own 40% of the JV invest $60 million. The Chinese solar company expects 600MW of cell capacity to be completed by mid-2011, and future production to be dependent on market conditions.
Suntech Power forecast earnings for 2011at a range of $1.40 to $1.60.
-- Written by Eric Rosenbaum from New York.
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