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Suntech: Another Solar Company at Risk as Prices Tumble

February 17, 2009
by Eric Savitz
Blogger and Columnist, Barron's, Tech Trader Daily

Eric Savitz

Gabelli & Co. analyst John Segrich today launched coverage of Suntech Power (STP) with a Sell rating and a $5 target price.

Segrich notes that Suntech has emerged as the largest Chinese solar module manufacturer; but he says the company’s stock is likely to underperform as the rapid deterioration of pricing and demand in the solar market continues amid the sharp economic downturn.

For 2009, Segrich expects the company to produce $1.95 billion in revenue, shipping 690 MW, below the company’s forecast of 800 MW or more. Segrich notes that the company’s initial response to the slowdown was to reduce volumes–but he thinks the company will drop prices aggressively in Q1 to increase utilization and maintain market share. Segrich forecasts negative free cash flow for the year of $530 million, with significantly depressed margins, as prices sink.

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