Russo Buy Update: Daqo New Energy's Shares Shine

While the Chinese polysilicon maker fell today, shares of the company have surged 87% since the buy recommendation.
Anthony RussoOct 16,2020,16:24

Since I recommended a buy on Daqo New Energy (NYSE: DQ) in early September, shares have been surging.

One of the largest Wall Street-listed Chinese solar players has been benefiting in 2020 from Beijing renewing power subsidies to 92.36 billion yuan ($13 billion), which is nearly 8% higher compared to 2019.

That said, shares of Daqo slipped 6% intraday Friday after it lowered its third-quarter guidance for its polysilicon sales. It now expects that its polysilicon sales to external customers in the quarter were around 13,643 MT, down from its range of roughly 17,000 MT and 17,500 MT that it previously guided for.

However, even with today’s fall, the stock has still skyrocketed 87% to date since I recommended the buy.

While the solar sector has been sunny this year, does that mean you should look to buy Daqo now after the fall today? I would say no for now, but you should hold if you went ahead and bought the stock already within the last several months.

Currently, the stock in the polysilicon maker is pretty expensive, as it trades around 44 times earnings.

Before looking to buy, I would either wait until the Daqo officially reports its third-quarter financials and winds up beating estimates or if the stock falls to around $150 per American depositary share.

On a positive note for Daqo today, it said it is seeing orders and product deliveries return to normal levels in October after a “dramatic rise” in Polysilicon average selling prices that caused delays from customers in September.

“We expect the inventory built up temporarily in September will be sold in the fourth quarter, as we expect to see strong end-market demand both domestically and abroad,” It said.

In its latest quarter, the polysilicon manufacturer’s revenues hit $133.52 million, up from $65.96 million in the same period last year on earnings of 16 cents a share. According to the Zacks Consensus Estimate, Daqo was expected to report a loss of 3 cents a share, while revenue was anticipated to come in 25% lower.

Shares of Daqo have rallied 269% year-to-date.

Topics:Daqo, buy, sell