Sun Shines on Solar Plays

12/09/2013 8:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Growth stock expert Mike Cintolo sees upside opportunity in the solar sector. In his Cabot Top Ten Trader, the advisor highlights two favorite plays.

Solar-sector leader First Solar (FSLR) has been riding high in the wake of its strong third-quarter earnings report. The firm crushed estimates, with revenue up 51% and earnings jumping 80%.

Its success is due to continued increases in product efficiency, with lower costs and increased module efficiency slashing the cost for electricity generated at First Solar's 550 megawatt Desert Sunlight Solar Farm to $0.59 per watt.

First Solar's advances make it a prime candidate to benefit from the European Union's goal of 20% renewable energy by 2020.

Analysts are also projecting the rooftop solar market will grow from 15,941 megawatts to 26,732 megawatts, with much of that growth expected to come in the US.

What's more, First Solar's purchase of TetraSun earlier this year, gives the firm access to crystalline silicon solar cells, which are used primarily in rooftop installments, due to their size and efficiency.

Lastly, First Solar currently sports a net cash position of about $1.5 billion, which the company can parlay into both R&D and bigger solar farm installations. We continue to see First Solar as a leader in the solar industry.

Canadian Solar (CSIQ) is a Chinese solar company that's headquartered in Ontario. The company makes silicon ingots, wafers, solar cells, and modules, and ranks among the largest solar companies in the world.

The news that the National Bank of Canada is providing $33 million in financing to allow Canadian Solar to build a new power plant in Ontario, shows the advantages of both size and a Canadian location.

Canadian Solar has also contracted to build four 10MW utility scale power plants in Ontario. Once again, its vertically integrated structure and size, plus its Canadian location, lets it take on large-scale projects like this.

Part of the company's recent appeal is the 44% jump in revenue in the company's Q3, as well as its first positive EPS results in eight quarters.

From a loss of $3.11 per share in 2012, Canadian Solar is forecast to earn 62 cents per share in 2013 and $2.19 in 2014.

As solar moves toward cost parity with fossil fuels in energy production, the company is expected to continue to thrive.

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