This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense and which ones investors should act on. Today, we're focusing our lens on the solar power companies, as investment banker Canaccord Genuity initiates coverage of the sector with new buy ratings for SolarCity (NASDAQ:SCTY.DL) and SunEdison (OTC:SUNEQ), but withholds endorsement for SunPower (NASDAQ:SPWR). Taking these ratings in order...

SolarCity, Elon Musk's venture for leasing solar panels to the military, business, and consumers, won a "buy" rating and a $94 price target from Canaccord Genuity this morning. Quoted on, the analyst predicted that SolarCity will "continue to lever its scale, leading brand, project finance capabilities and channel partners to reduce component costs, costs of capital, expand geographically and continue growing volumes."

One thing Canaccord did not predict for SolarCity, though: profits.

While SolarCity's revenues are growing by leaps and bounds -- up fivefold over the past five years -- most analysts who follow the company see nothing but losses for SolarCity at least as far out as 2016 (according to S&P Capital IQ estimates). Unprofitable today, and burning increasingly large amounts of cash with every passing year, it's hard to see the stock as attractive when all of its "levering" of "scale" seems to result in only greater losses for SolarCity's shareholders.

Next up: SunEdison. The company formerly known as MEMC Electronic Materials used to be a pretty pure play on the production of silicon wafers for computer chips and solar panels. Today, SunEdison is more of a bet on the increasing popularity of large-scale solar power projects, which now account for a majority of the company's revenues.

Canaccord likes the stock as a play on "greater commercial and utility-scale adoption," noting that with 1.3 gigawatts of solar power generating capacity interconnected already, SunEdison has four more gigawatts' worth of projects in its backlog, "providing good visibility and a hedge against political uncertainty with respect to solar subsidies."

Like SolarCity, however, SunEdison is also unprofitable today, and burning cash like mad, with $1.91 billion in negative free cash flow over the past 12 months dwarfing even the company's $1.11 billion trailing GAAP loss. So long story short, Canaccord may like the stock, but if you like to own companies that actually earn profits from their business, there's really not a lot to like about SunEdison today.

SunPower Corporation
Last, and in Canaccord's estimation least, we come to SunPower. A bit of an oddball in the solar sphere, this company is actually earning a profit -- $215 million last year (although free cash flow is negative, natch).

Canaccord criticizes the company for having a too-slow growth rate (analysts see its profits growing at "only" 30% annually over the next five years). But from a traditional "we like to own companies that earn profits" perspective, it's hard to see why Canaccord would leave this stock out in the cold while showering praises on its money-losing rivals.

As Canaccord itself admits, "SunPower has among the strongest pipelines, project experience and technology in the solar space. We calculate that it is retaining significant amounts of value from the projects it sells and from its residential leases, largely given the higher energy production its systems provide over their lifetime." 

Now pair this praise with the analysts' consensus projection of 30% long-term earnings growth and SunPower's 27.5 P/E ratio. If the company can just turn its cash flow statement around and begin to generate a bit of cash profits to back up the "net earnings" it's reporting on its income statement, this just might be the solar stock to beat.