Bear of the Day: Canadian Solar (CSIQ)

Canadian Solar Company Overview

Zacks Rank #5 (Strong Sell) stock Canadian Solar (CSIQ) is an Ontario-based global renewable energy company founded in 2001. The company produces solar photovoltaic modules and delivers complete solar energy solutions. CSIQ has two primary businesses: CSI Solar, which focuses on producing solar modules and battery storage systems, and Recurrent Energy, which develops and manages utility-scale solar and energy storage projects. The company’s products include a range of solar modules built for use in a wide range of residential, commercial, and industrial solar power generation systems.

Trump Tariffs are a Potential Headwind for Canadian Solar

For decades, Donald Trump has talked about how the United States is being taken advantage of by other countries on trade, leading to unfair trade imbalances. During his first term, he was able to negotiate the USMCA (United States-Mexico-Canada Agreement). However, once again back in power Trump, and this time with a “mandate,” Trump is looking to level the playing field more this time. In doing so, he has declared April 2^nd “Liberation Day” for America – a day where he will levy “reciprocal” tariffs on countries that he feels are abusing the United States.  

While the full details of the Trump tariff plan will not be unveiled until April 2^nd, Canada appears to be in the crosshairs. In fact, Canada, which supplies parts of the US with energy, threatened to add a surcharge to electricity for US customers. Though the energy surcharge has been removed, the rhetoric between the US and Canada has reached a tipping point. The new tariffs will likely include solar panels and raw materials needed to manufacture them.

Increased Competition from China

The average selling price of solar modules is decreasing significantly due to increased manufacturing capacity in China from companies like Jinko Solar (JKS). Chinese competitors dominate the market, flooding it with an oversupply of solar products while driving down prices globally. Meanwhile, Tesla’s (TSLA) energy storage and energy generation business is has grown 67% year-over-year, while deployments have soared.

Canadian Solar Remains Unprofitable

Wall Street analysts project that will lose money in 2025. Meanwhile, tariffs and Chinese competition could make those losses more profound. In addition, CSIQ has a negative Zacks Earnings “Expected Surprise Prediction” score, which suggests that a negative earnings surprise will likely occur next time the company reports.

CSIQ Exhibits Relative Weakness

CSIQ’s relative weakness over the past year is troubling. The stock is down 56% while the S&P 500 Index is up 6.8% over the same time.

Bottom Line

The evolving global trade landscape, increased competition from China, and falling solar prices mean Canadian Solar faces significant headwinds in the coming months.

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This article originally published on Zacks Investment Research (zacks.com).

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