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Canadian Solar (CSIQ) Loses Ground as Barclays Cuts Rating

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Shares of Ontario, Canada-based solar company, Canadian Solar Inc. (CSIQ - Free Report) , dropped 4.23% yesterday after Barclays downgraded the stock rating to "Equal Weight" from "Overweight" on Aug 24.

The firm also slashed its price target to $14 from $24 as it believes that Canadian Solar’s stock poses a greater risk relative to its peers, such as First Solar Inc. (FSLR - Free Report) and 8point3 Energy Partners LP .

The firm remained careful on the bigger issue of “unintended consequences of government policy distorting the solar supply/demand relationship on a global scale”. Hence, it now expects the company to generate gross margins of 12.7% in 2017, down from 16.2% in 2016. Even, Barclays lowered its earnings estimates for 2016, 2017 and 2018 to $2.00, $1.54 and $1.66 from $2.35, $2.65 and $3.15, respectively.

Although Barclays acknowledges Canadian Solar’s advantage of high module market share and operating history, it believes that the company's net debt to EBITDA ratio poses a greater risk than peers heading into 2017.

Q2 at a Glance

Canadian Solar reported second-quarter earnings of 68 cents per share, beating the Zacks Consensus Estimate of 40 cents by a whopping 70%. Reported earnings also surged 119.4% from the year-ago tally of 31 cents.

Again, the company’s total revenue of $805.9 million surpassed the Zacks Consensus Estimate of $711 million by 13.3%. Revenues were also up 26.6% from $636.7 million reported in the prior-year quarter (read more: Canadian Solar Beats on Q2 Earnings and Revenues).

Zacks Rank & A Key Pick

Canadian Solar presently carries a Zacks Rank #4 (Sell). Investors may consider a better-ranked stock in the space like Sunrun Inc. (RUN - Free Report) that sports a Zacks Rank #1 (Strong Buy).

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