Jack Yetiv

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    • Solar Investors, Understand Silicon Supply
      For quite some time, I have believed that solar PV demand will exceed supply even though PV panel supply is growing quickly.

      This article seems to confirm that thesis.

      Jack Yetiv
      May 19 09:04 am |Rating: 0 0 |Link to Comment |View article
    • Beware of the Solar Stock Fad
      The "logic" of this article escapes me. The author (who does not know what the solar things that sit on a roof are called) posits that because some stocks--none of them solar stocks--are way below their highs (JNPR, CSCO, etc), that means solar stocks constitute a "fad."

      If the author's point is that some solar stocks are overpriced, I would agree, but that is hardly a meaningful or useful observation. If the author's point is that NO solar stock is worth owning, he is plainly wrong.

      If the author's point is neither of the above, then I must confess I don't know what his point is.

      Jack Yetiv

      Feb 24 10:37 am |Rating: 0 0 |Link to Comment |View article
    • Why Canadian Solar is the Best Solar Stock
      To Zawy: I agree with your analysis above, but really, your conclusion contradicts the first 2/3rds of your post. What you miss in the first part of your post is number of shares of each company. The point is, Who cares which company has more profit--whether 3X, 7X, or 100X? If Exxon makes $40 billion profit in a year, and has 40 billion shares, its earns $1/sh. If another company only makes 1/40th as much profit--only $1 billion--but only has 100 million shares outstanding, it makes $10/sh EVEN THOUGH IT MADE a tiny profit compared to Exxon.

      The conclusion to your post basically is another way to compare PE's, which is how you get to the conclusion that if CSIQ makes the money that the analysts (and the company) believes, then it worth potentially 10X more than FSLR.

      I agree. Your can reach the same conclusion by comparing FSLR's forward PE of 85 (see my table) versus CSIQ's FPE of 11--about an 8-fold difference.

      Two last comments: The best-fit curve analysis you've made is correct, but alas (with all due respect), it is useless. Stock buyers do not buy stock based on PREVIOUS growth rates--they assign premium to stocks for FORWARD growth rates. You acknowledge that FSLR's forward growth rate is less than CSIQ's (assuming they both perform as expected), which makes sense because it is harder to double bigger sales than it is to double smaller sales.

      Second, I AGREE (as I stated in my article) that FSLR--because it is the recognized low-cost producer, because people think its sexy ("sentiment"... because it has executed longer than CSIQ, etc--DESERVES A PREMIUM.

      What I vehemently DISAGREE about is that it deserves a 10-FOLD premium to CSIQ. It simply does not under any reasonable investing principles. Two-fold, maybe. Three-fold--that's a stretch.

      But 10-fold? That's simply ridiculous.

      Zawy, do you hold a position in FSLR, and if so, what is your average cost and what are your plans for holding?

      Jack Yetiv
      Feb 07 10:35 am |Rating: 0 0 |Link to Comment |View article
    • Why Canadian Solar is the Best Solar Stock
      One final comment to Acker. His comment that CSIQ cites a potential technology (UMG) as their "back-up" plan is a misstatement of what I posted and what the company said in their last quarterlt report. The UMG technology--if it pans out--will ADD to their sales, not serve as a "back-up." It's a bonus, not part of the guidance. If it comes in fully, they should approach $800 million in sales. If it does not, they' come at the midrange of their $650-$750 million guidance.

      In summary, without being discourteous to Acker, I tend to agree with Mr. Yusufi who believes that Acker perhaps holds a short position in CSIQ. Much of Acker's "information"... is wildly inaccurate, even on critical issues such as the fact that he says CSIQ does not manufacture solar cells, whereas in reality, the company has manufacturing capacity of 100 MW. If he has "missed" this critical fact, he is either poorly informed or is not objective.

      Mr. Yusufi believes that quality of management and "sentiment" should be taken into account. I agree, but did not do so in my article for several reasons. First, I wanted my article to be objective, and these two issues are as subjective as things get. Second, I don't know enough about the quality of mgt at the 11 companies I compared to even make a semi-credible argument on the issue, and when I don't know about something, I simply avoid it. And third, "sentiment" is a changeable thing--and a central theme in my article was that I believed that "sentiment" should soon be changing, against the likes of FSLR and in favor of the low-PE stocks in this sector, if they continue to perform.

      Solarman likes TSL because it is "integrated,"... but so is CSIQ for at least 50% of their panel production, and I suspect this percent will increase going forward. Having said that, I stated in my article that TSL is indeed worthy of further analysis, and that one area I would want to get comfortable with is why there is such a disaprity between high and low EPS expectations for TSL in 2008.

      Solarman also says "smaller" companies may get killed. As you can see from the table in my article, I did not really include any "small" companies on the list. Expected 2008 revenues range from $600 million for SOLF to $1.5 billion for STP, with both TSL and CSIQ at $700 million. If the absolute biggest manufacturer of solar panels does $1.5 billion in sales in 2008, $700 is not "small," in my view. If Exxon has sales of $300 billion per year, another oil company that does $150 billion per year would hardly be considered "small."

      Dr. Sarkar is asking me about marketing for CSIQ. I cannot help since I have asbolutely no relationship to CSIQ (except owing its shares), but he can go to the website and contact the company directly.

      David White says I made a mistake on expected EPS for SOLF. He is correct. He says Yahoo shows $1.30, Schwab shows me $1.23. So at today's closing price of $15.35, we're looking at a PE of 12, rather than the incorrect PE of 19 in my spreadsheet. But we all acknowledge that SOLF has a lot of questions about it--and still has a slightly higher PE than CSIQ, a much higher PS (almost double) and a 2007-to-2008 expected growth rate that is LESS than CSIQ's. Given these facts, SOLF would only be a better play if its PE was less than CSIQ's. Since it is not, to me CSIQ is clearly the better play.

      Mr. White also believes LDK has a better PEG than CSIQ. That is vastly incorrect. LDK's sales are expected to less-than-double in 2008, while CSIQ's are expected to double-and-a-half, so CSIQ's growth is faster. In addition, LDK's PE is about 20, versus 11 for CSIQ. Thus, CSIQ's PEG is actually about 3 times BETTER than LDK's.

      Zawy says FSLR's growth rate y-o-y is 167%. That is incorrect--the correct number is 67%. CSIQ's expected growth rate from 2007 to 2008 (700/290) is 241%. FSLR isn't even in the ballpark in terms of growth rate, gentlemen (and ladies). Let me also correct another commonly-held misconception--namely, that FSLR is a "big" solar company whereas CSIQ and the rest are small. But the spreadsheet in my article shows otherwise--FSLR's expected revenues in 2008 are $794 million, whereas the low-end of CSIQ's guidance for 2008 is $650. Hardly a difference to get excited about. If you compare expected EPS in 2008 between CSIQ and FSLR, it's not all that different eithyer ($2.01 for FSLR, $1.63 for CSIQ).

      Zawy also says FSLR's PE against 2009 (NOT 2008) expected EPS is 68--which is still more than SIX times CSIQ's PE for 2008 (not 2009). That does not sound like a bargain to me. Indeed, the next time FSLR goes to $190, I'm gonna buy puts. I haven't done so before, but I am getting extremely tempted to do so.

      Finally, Plasticman also says my EPS numbers for 2007 appear "wrong" to him. They are not. Here is the reason for the discrepancy: As I explained in the article, I quoted 2007 EXPECTED EPS, NOT trailing 4 quarters. The EPS he finds by looking on Yahoo and elsewhere almost always shows trailing 12 months, hence the difference. Basically, I included 4Q07 in my 2007 EPS numbers, but his sources did not because most companies have not yet reported fourth quarter.

      Thanks, Jack Yetiv

      Feb 06 21:05 pm |Rating: 0 0 |Link to Comment |View article
    • Why Canadian Solar is the Best Solar Stock
      OK, I see I have my work cut out for me, responding to some of the posts above. Regardless of whether I agree or disagree with you, I will not be disagreeable about it and I VERY much appreciate this interchange.

      Let me begin with a general, but very important comment: Most of the posts critical of my article are simply pointing out two weaknessses I pointed out extensively in my own article--namely, (1) that it is based on 2008 earnings and sales estimates, and (2) that is is a STARTING point for analysis, not an end point. I challenged everyone to come up with a better alternative, and DOCUMENT why it was better.

      NOBODY has done so. I think that says a lot.

      Some people (primarily Acker) have pointed possible problems with his anticipation of CSIQ's ability to execute at a rate that he concedes to be faster than any other company in this space. I share his concern, but (1) he has not referred me to any data to support his doubts, (2) I think a 2008 FPE of 11 already prices in that doubt, and (3) don't other companies in this space also have their issues? I have read fewer negative issues (collectively) on CSIQ than almost any other company in this space.

      Acker also fails to explain the amazing ramp of revenues in the first 3 quarters of 2007 of $17 million, $60 million, and $97 million. If the last quarter comes in at the range guided by the company ($110-120 million), does that 4-quarter performance suggest poor execution to ANYONE? Not to me, that's for sure.

      Also, for a company that has performed so well in 2007, is it THAT hard to believe that they can grow sales by $20 million per quarter (about 15%/qtr) in 2008 to $135, 155, 175 and 195 million? If they do that, they get to $655 million in revenues in 2008--at the low end of their guidance.

      Acker is also incorrect in some of his facts. His biggest error is when he says CSIQ does not make cells--they simply "assemble" modules. Quote from 3rd quarter report: "Our second 25MW solar cell MANUFACTURING line is now operating at full production capacity. In addition, we have completed the installation of our third and fourth lines and expect to bring our total INTERNAL SOLAR CELL MANUFACTURING CAPACITY TO 100 MW STARTING NEXT MONTH." (Emphasis mine).

      For perspective, 100 MW at todays ASP's equates to about $350 million in revenue. So far from Acker's assertion that CSIQ does not produce cells, effective TWO MONTH AGO, they were producing THEIR OWN CELLS at an annual rate of $350 million. Not so hard to believe they can hit $650 million in total sales in 2008.

      Acker also gets excited because some of CSIQ's revenues in the third quarter were for "silicon material sales." What he forgot to mention is that those sales amount to $3.8 million, while the other $93.6 million in sales came from module sales. I can't get worked up about 4% of CSIQ's sales.

      As to CSIQ's use of the word "believe" it has secured 90% of its silicon, I have looked at other company's reports and that sort of word is common. I think it is a CYA word because things can happen and they don't want to be nailed for stating as "fact" something that is more like avery realistic expectation. For example, let's say they have a signed contract with a new supplier, and have even made a payment, but that supplier defaults. They are entitled to say they "believe" they have that supply, but things go wrong. In any case, even 70% would be good--90% is incredible compared to almost any other company.

      Next, Acker criticizes all analysts and says his projections are as good as any of theirs. Cool. I hereby ask Acker to provide his estimate for sales and earnings for CSIQ in 2008, and I will average his value with all the rest of the analysts. He says he would love to see Adam Hinckley's analysis. It might have been better to look at it before criticizing it, but in any case, that analysis is available and I would encourage Acker to get it, analyze it, and THEN tell us what is wrong with it.

      My next post will continue where this one has left off.

      Jack Yetiv
      Feb 06 19:25 pm |Rating: 0 0 |Link to Comment |View article
    • Why Canadian Solar is the Best Solar Stock
      A few responses to AckerAnalytics:

      1) I acknowledged the potential "error" in using forward PE, but that error applies to all of thes companies. Surely, in coming up with their 2008 estimates--which I averaged in order to minimize the erro--the analysts are aware of what you are saying above, and yet they are still collectively estimating $1.63.

      2) Here are CSIQ's revenues in the first 3 quarters of 2007 (all in millions): 17, 60, and 97. Projections for the fourth quarter are about 110-120 million, which seems believable given the first three quarters. CSIQ has guided to 650-750 million in 2008, and analyst Adam Hinckley thinks this guidance is conservative. These numbers certainly seem to dispute your argument that CSIQ has failed to execute.

      3) AS to its supposed lack of capitalization--CSIQ's LT debt is only 8% of equity, and it appears well enough capitalized to go from $290 million in sales in 2007 to $650 million (low end of guidance for 2008). Which other solar company is going to grow faster in 2008, and what is your basis for saying so?

      4) As to silicon sourcing, here is a direct quote from the third quarter earnings report: "The company believes that it has contractually secured 90% of its silicon or cell requirements to support module production of 200-220 MW in 2008. The company continues to evaluate new technologies, including the use of metallurgical silicon (UMG) products, which, if successful, would have the potential to increase total shipments by 30-40 MW in 2008." 35 MW should translate to an extra $120 million in sales.

      5) Finally, you don't say which company you prefer, and why. That would be truly much more helpful than simply criticizing CSIQ without reference to any data we can look at.

      Jack Yetiv
      Feb 04 21:33 pm |Rating: 0 0 |Link to Comment |View article

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