On Friday, Mizuho (NYSE:MFG) initiated coverage on Canadian Solar (NASDAQ:CSIQ), a leading global manufacturer of solar cells and modules with a market capitalization of $819 million, with an Outperform rating and a price target of $20.00. The firm highlighted Canadian Solar's position as a perennial top-5 player in the industry, with a battery energy storage business that is outpacing the sector's growth.
Trading at just 0.29 times book value, InvestingPro analysis suggests the stock may be undervalued despite recent challenges. Additionally, the company's Recurrent business, which focuses on developing solar and storage projects, was noted for its potential.
Mizuho's analysis pointed to Canadian Solar's strategic efforts to expand its solar manufacturing presence in the United States, aligning with the U.S. government's emphasis on near-shoring solar tariffs. The move is expected to bolster the company's market position, though InvestingPro data reveals current gross profit margins of 16.39% and significant debt levels that may impact expansion plans. Furthermore, the firm underscored the underappreciated value of Canadian Solar's margin-accretive energy storage business, which is successfully gaining market share.
The financial institution also praised Canadian Solar's pivot towards generating recurring EBITDA through its Recurrent project development business, with the company reporting EBITDA of $480 million in the last twelve months. This aspect of the business is anticipated to benefit from a partnership with investment giant BlackRock (NYSE:BLK).
Mizuho's price target suggests a favorable outlook for the stock, reflecting confidence in Canadian Solar's comprehensive business strategy and its components. For deeper insights into Canadian Solar's financials and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company's financial health and growth potential.
In summary, Mizuho's endorsement of Canadian Solar is based on a variety of factors, including the company's expansion in the U.S. market, the growth and market share of its energy storage business, and the strategic partnership with BlackRock that bolsters its project development segment. The firm's valuation of Canadian Solar also points to an attractive sum-of-the-parts valuation, indicating the potential for investor gains.
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