CSIQ oversold and valuation attractive

24 Apr

Canadian Solar bounce potential trade.
Its oversold and potentially pricing alot of the potential risk, making it attractive for a trade.

Fundamentally is attractive.
Tangible book value is 38 ish while stock is under 15.
They took one debt to build manufacturing facility, so debt is productive. 3.6b debt vs 1.94 cash.
PE is under 5, but when we factor in debt level, then the PE is realistically higher than PE shown.

Economic Factors still tough.
High rates are not helping solar industry as funding costs for operations and for consumer purchase financing costs are higher.
Also energy costs are moderate and not super high, and if energy falls with weak economic demand then this would hurt solar demand potentially.

Technical price action-
Csiq has been in a deep downturn in price and near extremes on the bollinger bands.
Earnings coming on may 9th will be a catalyst, negative earnings expected.

Trade idea, in my option, would be to buy long stock with no options used. If the trade doesnt work, I believe holding would be worthwhile. Avoiding options and option decay seems appropriate. I would target somewhere between 20-24 where the 200 day moving average is. tangible book value is at 38, but I dont believe a move all the way to that is highly probably because of the debt level and the nature of small margin business.