Canadian Solar (CSIQ) Raises Guidance

Rarely do I try to let emotion get involved (that will kill you as an investor or trader) but I am ultimately frustrated with the solar sector right now. After the Trina Solar (TSL) debacle my next two candidates to add/replace the position I had sold down in Trina so as to keep the sector weighting consistent were Canadian Solar (CSIQ) and Solarfun Power (SOLF). Canadian Solar was the 2nd cheapest stock in the space after Trina (so it still appeals to my growth at a reasonable price tendency), and Solarfun is essentially the people's champ (where traders flock to everytime the sector gets hot) And unlike Trina, both are trading above both key moving averages (50 and 200 day) - hence the reallocation of money I wanted to do into either (or both) of these names.

1. The 50 day moving average on CSIQ was in the $32s last week so I was poised with a large buy waiting there; but the stock only fell to $35. 5 sessions later it just hit $48. From $35 that's a 37% gain.
   
2. The 50 day moving average on SOLF was just below $18 last week, but I was greedy and was hoping to see it fall to its 200 day moving average in the $16s to layer in a large buy. 5 sessions later it hit $23. From $18 that's a 28% gain.

Instead I have Trina Solar smiling up at me. (yes its up 15% from its lowest point but after losing an arm and a leg the prior few sessions) I believe this type of performance will continue as the uncertainties overhanging the stock will persist for a while. So while this sector moves together, you have outperformers and underperformers. We know where our puppy falls in that spectrum.

Anyhow, because Canadian Solar (CSIQ) decided it was not going to become a forex trader, they were able to raise guidance substantially today. Also a move into the US market. Must be nice to have a management that just sticks to a simple game plan.

• Canadian Solar Inc. ("the Company'', ''CSI'' or ''we'') (Nasdaq: CSIQ - News) today announced that it will increase its 2008 annual revenue and output guidance to reflect the sales of its e-Module products. These sales will be realized in H2 of this year.
• The Company announced that it has commenced delivery of e-Modules to Pro Solar Solarstrom GmbH and Iliotec Solar GmbH of Germany. The companies signed annual supply agreements with CSI in early 2008. The total shipments to these two companies are estimated at 24.5 MW before the end of 2008. As of today, CSI's total committed sales of e-Modules in 2008 is 35 MW, with approximately another 20 MW of firm interest from additional customers.
• The company is accordingly raising its annual guidance for 2008 from 200 - 220 MW to 230 - 260 MW in output and its estimated annual revenue from $650 - $750 million to $750 - $870 million. The company estimates that it will ship approximately 10 - 12 MW of e-Modules to USA and South Korea in 2008, thus making these two countries significant markets for CSI.
• Based on robust market demand for our products, the Company plans to increase its annual ingot and wafer capacity from the previous target of 40 - 60 MW to 150 - 200 MW; to increase our internal cell capacity from the previous target of 250 MW to 400 MW and to increase module capacity to 800 MW. We expect to have the above new capacity fully commissioned at the beginning of 2009.

I try not to post about missed opportunities because frankly we could have a post like this every week, but since this one was so sharp and really shows the relative outperformance from being in the "right" stock versus the "wrong" one, even within a generally rising sector - it was worth pointing out. Now off to kick the proverbial dog.

Long Trina Solar in fund and personal account