Is now the time to buy into Q-Cells?

FRANKFURT Fri Jun 18, 2010 1:55am IST

Stocks

   

FRANKFURT (Reuters) - Q-Cells, the world's fourth-largest maker of solar cells, has been suffering greatly from the industry's crisis but recent analyst upgrades suggest that there could be cash to reap from its beaten shares.

The company's stock has dropped about 47 percent so far this year, performing worse than peers such as First Solar and Suntech, but some analysts have abandoned their long-term "sell" stance on the stock.

StarMine data shows that while 90 days ago 74 percent of analysts rated the stock "sell," that percentage has now dropped to 60, while the number of "buy" ratings has tripled in the same period of time.

While sceptics remain concerned about Q-Cells turnaround, optimists note that a weak euro and low market expectations will benefit the company in the second half of the year and beyond.

'RISING FROM THE ASHES'

"After 1.5 years of frustrations we believe that expectations of the financial community are fairly low and Q-Cells can only surprise on the upside," WestLB analysts wrote, upgrading the stock to "add" from "neutral" earlier this week.

They added that the company's push into the end-customer market as well as the improvement of its balance sheet should take effect in the coming months.

DZ Bank analyst Sven Kuerten, upgrading the stock to "buy" from "sell," noted that the weak euro could also help Q-Cells, making it harder for Chinese peers to lower their prices in face of the looming cuts in solar subsidy cuts in Germany.

NO MOMENTUM

Most analysts, however, remain concerned that after the company's record 2009 loss of 1.4 billion euros ($1.72 billion), it will be difficult for Q-Cells to regain its spot as the world's biggest maker of solar cells.

"We expect Q-Cells to lose further market share," UBS analyst Patrick Hummel wrote, also pointing to further pricing pressure and rating the stock "sell."

Equinet analyst Sebastian Growe also kept his "reduce" rating on the stock, noting that "solvency issues in several EU countries could weigh on project financing and ... aggressive Asian peers seem to continuously push forward capacity expansion."

(christoph.steitz@thomsonreuters.com; +49 69 7565 1269; Reuters Messaging: christoph.steitz.reuters.com@reuters.net))

($1=.8154 Euro)