Solarfun Power (Nasdaq:SOLF) was downgraded from "Buy" to "Hold" by Auriga, citing higher cost of inputs (glass, back sheet, poly, wafer, cell), which could lead to challenging margins and lower earnings for the company.
"Specifically, our model calls for - 19% gross margins in both Q3 and Q4, while the consensus estimates incorporate gross margins of 22% over the same timeframe - a 300 basis point discrepancy. While we expect positive comments with regard to both shipments and pricing, we believe the SOLF may be susceptible to higher input prices, thus affecting COGS, and ultimately EPS. We have tweaked our model slightly higher in the near term, but have kept our 2011 assumptions unchanged. Further clarity on ramping additional capacity next year could help raise our 2011 estimates and would allow us to be more constructive on the stock in the future. But in the short term, we find it prudent to step aside until the consensus expectations are re-evaluated," said Auriga analyst Mark Bachman.
Solarfun closed down Friday at $11.63, losing $0.79, or 6.36 percent. Auriga has a $13 price target on the company.
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