The Good and Bad From Canadian Solar Today

This morning, Canadian Solar (NASDAQ: CSIQ  ) announced preliminary fourth-quarter 2013 results and the market wasn't at all pleased with what it saw, pushing the stock 5% lower. We can't overlook that 2.6 million share offering along with $100 million in convertible notes, which dilutes shareholders, but the figures from Q4 are most important today.

Below I have built a table showing what Canadian Solar reported in the third quarter and what it expects to report in the fourth. You can see that shipments are up dramatically but revenue didn't rise all that much and gross margin was actually down in the quarter.


Q3 2013 

Q4 2013 


478 MW

605-620 MW

Net Revenue

$490.9 million

$510-$520 million

Gross Margin



Source: Canadian Solar press releases.

This may seem alarming at first but we need to consider that Canadian Solar, like SunPower (NASDAQ: SPWR  ) and First Solar (NASDAQ: FSLR  ) , now generates a significant portion of its revenue from project sales, not just panel sales. From quarter to quarter, projects may be in different phases of construction, complicating the revenue comparisons.

Workers installing panels at the utility scale California Valley Solar Ranch. Image courtesy of SunPower.

For example, last quarter Canadian Solar closed the sale of two projects totaling 16 MW to TransCanada at a value of C$95 million and Blackrock acquired two projects totaling 20 MW valued at $120 million. These last two projects are partially completed but depending on when they meet different phases of completion their revenue could be recognized in Q4 or Q1 of 2014.

Since projects are selling for around $6 per watt and panels are selling for around $0.65 per watt the mix of the two can have a huge impact on the company's revenue figure. You can see above that shipments grew at a rapid rate in a single quarter, but revenue didn't grow, indicating that projects probably played a much smaller role in the company's income statement last quarter than it did in the third quarter.

The same balance holds true with SunPower, who reports tomorrow and First Solar, who is almost 100% focused on the project business. The revenue number is almost meaningless at these companies; instead, investors should focus on shipments and gross margins.

Canadian Solar expects to report gross margins of 16%-18%, up from its previous expectation of 13%-15%, which didn't include any project sales. This tells me that panel prices were higher than expected, which should be true across the industry given the high demand last quarter.

Today's announcement from Canadian Solar is reason for solar investors to cheer, not fear, fourth-quarter results, it just takes a nuanced look at the numbers to understand what's happening. Long term, the dilutive offering will have more impact on shareholders than a delay in project revenue recognition, which investors are focusing on today.

A stock to buy for growth this year
The solar industry is hot right now, but it's not the only place to look for growth in the market. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 11, 2014, at 4:59 PM, solarfuture wrote:

    So if everything was good, which was the bad, based on your header. And the stock finished down 8%, so it looks to me that everything was bad instead of good.

  • Report this Comment On February 11, 2014, at 7:14 PM, singular wrote:

    Well said, Travis. I was getting tired of reading the trash that was coming out today.

  • Report this Comment On February 11, 2014, at 7:56 PM, Austyn41 wrote:

    Bought 2,500 shares of Canadian Solar today. They are setting up for something huge. Mark my word.

  • Report this Comment On February 12, 2014, at 10:17 PM, stockbutterfly wrote:

    Travis I really appreciated your analysis that revenues mean so little and it's all in the shipments and margins. It helped me understand the Sunpower results as well today. We saw what happened to the big solar players in China that had big revenues. Didn't work in the auto sector and it doesn't work in the solar sector either. You are doing a great job. I work as a biomass energy scientist (a competing renewable field) and decided solar is going to beat us in the power generation field. We are now focussing on the materials side of biomass as we are going to have a tough time competing with solar power for energy applications.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2834760, ~/Articles/ArticleHandler.aspx, 8/31/2015 11:41:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated Moments ago Sponsored by:
DOW 16,556.08 -86.93 -0.52%
S&P 500 1,977.90 -10.97 -0.55%
NASD 4,806.73 -21.59 -0.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 11:24 AM
CSIQ $19.17 Up +0.34 +1.81%
Canadian Solar, In… CAPS Rating: **
FSLR $48.22 Up +0.42 +0.88%
First Solar CAPS Rating: ***
SPWR $24.42 Up +0.10 +0.41%
SunPower Corporati… CAPS Rating: ****