Option Trade 
Canadian Solar Inc. (NASDAQ:CSIQ) Calls 
Monday, March 07, 2016

**OPTION TRADE: Buy the CSIQ Jul 2016 25.000 call (CSIQ160715C00025000) at approximately $2.35. Place a pre-determined sell at $4.70.

Note: No protective stop losses added -- but if you wish to do so make it $0.95.

by Ian Harvey

March 07, 2016

Canadian Solar Inc. (NASDAQ: CSIQ), is expected to report its Q4:15 earnings on Thursday, March 10 before market open. Analysts expect $1.04 billion in revenue for the quarter and earnings of $0.76 per share, compared to revenues of $956.15 million and earnings of $1.28 per share for the same quarter of last year.

The company has avoided over-expanding and taking on too much debt as did the prominent solar energy services provider SunEdison (SUNE).

With a market cap of $1.26 billion, Canadian Solar is a low-cost producer of solar energy components and systems, including solar ingots, wafers, cells, modules, and integrated power systems. The company has targeted emerging markets and developed countries in the Euro Zone. Europe's growth engine Germany, which has vowed to shutter all nuclear plants, is a major customer.

The company has headquarters in Ontario but does most of its manufacturing in China. This dual presence has enabled Canadian Solar to keep costs low while sidestepping the hassles and transparency issues of investing heavily in China.

The company has recently increased expansion efforts in emerging markets and countries in Europe, specifically Germany, which is committed to avoiding the use of nuclear plants. The company has also secured credit facilities and loan agreements to expand projects in the U.S. and Japan.

Canadian Solar will open at $22.54 today. The firm has a market capitalization of $1.25 billion and a price-to-earnings ratio of 7.08. Canadian Solar has a one year low of $14.16 and a one year high of $40.08. The stock has a 50 day moving average price of $19.75 and a 200-day moving average price of $21.34.

Last month, the company issued preliminary Q4 results which indicated growth in revenue, shipments, and 2016 guidance. Following this announcement, analyst Carter Driscoll of FBR & Co. weighed in on the stock on February 16, 2016, with an Outperform rating and $32 price target. He stated, “Canadian Solar preannounced positive 4Q15 results for all key financial metrics. The company also raised 2016 guidance, which reaffirms our view that Canadian Solar commands a market-leading module position diversified by geography and a growing grid-scale solar development platform. We would expect the stock to react positively on the solid 4Q15 beat and the increased 2016 guidance.”

All 4 analysts who have rated the company in the past 3 months gave a Buy rating. The average 12-month price target for the stock is $35.67, marking a 58% upside from where shares last closed.

Harvey’s Options Volatility Indicator


Canadian Solar offers good growth prospects at an attractive price. The company has a balanced approach towards solar, which is expected to hit the 95 GW mark by 2022 (enough to power 19 million homes). It is regarded as a one of the best Tier 1 module suppliers globally, and will further reduce costs through technological improvements and capacity expansion. The valuation is cheap, making this a good time to build a position in the stock. CSIQ is one of the market leaders in the industry and is seen as bullish.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the CSIQ Jul 2016 25.000 call (CSIQ160715C00025000) at approximately $2.35. Place a pre-determined sell at $4.70.

Note: No protective stop losses added -- but if you wish to do so make it $0.95.

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