Monday November 17, 2008
"Suntech Power (NYSE: STP), a world leader in photovoltaic solar cells and solar electric systems, offers exceptional long-term potential," says Jim Trippon in The China Stock Digest.
"Suntech Power’s solar cells are used to supply power to the electricity grid within China and in several European countries. Suntech is the number one company in the Chinese solar energy industry, and it aims to expand its sales in the United States in the coming year.
"Suntech is predicting that tax credits for solar power in the U.S. will boost the company’s American sales, just as European tax credits made solar energy affordable and popular in Europe.
"The company says it plans to triple sales in the U.S. next year through large megawatt and commercial projects and an aggressive expansion into the residential market.
"The company’s next earnings report is expected on November 20. In Suntech’s most recent report the company announced a massive 58% increase in earnings for the second quarter of 2008 compared to the same quarter a year ago.
"Revenues and margins were equally impressive. Net revenues grew 51.3% year-over-year to $480.2 million. Gross margin increased to 24.7% for the second quarter of 2008 compared to 20.3% from the year before.
"We believe that Suntech is well positioned to continue this growth trajectory. For the rest of the year, Suntech has raised its 2008 revenue outlook to a range of $2.05 billion to $2.15 billion.
"That’s up from a previous forecast of $1.9 billion to $2.1 billion. The company has also increased its target volume for shipment of photovoltaic cells.
"Suntech took a one-two punch to its share price recently from U.S. market volatility and a sharp, unexpected decline in energy prices. We believe the stock is now modestly priced for such a rapidly growing company with a P/E/ multiple of approximately eleven."
