On Friday, GLJ Research adjusted their outlook on Daqo New Energy Corp (NYSE:DQ) shares, a leading manufacturer of high-purity polysilicon for the global solar PV industry. The firm lowered its price target to $12.51 from the previous target of $19.66. Despite this change, the sell rating previously assigned to Daqo's stock remains in place.
The adjustment follows a critical assessment of the company's financial prospects. GLJ Research anticipates significant potential decline in Daqo New Energy's share price, which has already seen a substantial drop of 50.6% over the past year. This downturn positions the stock near the firm's prior price target.
The report also casts a doubtful light on Wall Street's second-quarter and full-year 2024 revenue and adjusted earnings per share estimates for Daqo New Energy. According to the analyst from GLJ Research, these projections may be overly optimistic.
Furthermore, GLJ Research raises concerns about Daqo New Energy's cash burn. The firm suggests that the amount of cash the company is expected to consume in the second quarter and throughout the year 2024 could be more than what is currently anticipated by the market.
In summary, the revised price target of $12.51 reflects GLJ Research's cautious stance on Daqo New Energy's financial health and market performance expectations. The firm advises that the company's stock may face additional downward pressure in the near future.
In other recent news, Daqo New Energy reported mixed financial results for the first quarter of 2024. The company surpassed production volume expectations, producing 62,278 metric tons, a slight increase from the previous quarter.
However, net income attributable to shareholders fell to $15.5 million, a decrease from $53.3 million in the previous quarter and $278.8 million year-over-year. In response to these developments, Daqo has adjusted its capital expenditure plan to about $700 million for the year, largely focusing on its Inner Mongolia polysilicon project.
On the brighter side, despite the challenging market conditions, Daqo's production costs decreased by 2%, to $6.37 per kilogram. The company also reported a strong cash balance of $2.7 billion and EBITDA of $77 million.
Looking ahead, Daqo forecasts similar poly production volume for Q2 2024 and expects industry improvements in the second half of the year. The company is also considering potential expansions in the US, Middle East, and Southeast Asia. These are recent developments that reflect Daqo's strategic planning amid the current industry landscape.
InvestingPro Insights
In light of GLJ Research's recent price target adjustment for Daqo New Energy Corp (NYSE:DQ), current metrics from InvestingPro provide additional context for investors. Daqo's market capitalization stands at $1.32 billion, and the company is trading at a low Price/Book multiple of 0.28, which could be appealing for value investors. The P/E ratio, another key valuation metric, is currently at 8.23, suggesting the stock may be undervalued compared to earnings.
InvestingPro Tips highlight that Daqo holds more cash than debt on its balance sheet, which is a positive sign of financial stability. Additionally, despite the concerns raised by GLJ Research, analysts predict the company will be profitable this year. For those looking to delve deeper into Daqo's financials and future prospects, InvestingPro offers additional tips and insights. By using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a wealth of information that could inform their investment decisions, including 15 more InvestingPro Tips for Daqo New Energy Corp.
While the past performance has reflected a significant price decline over the last year, with a -52.12% one-year price total return, the InvestingPro Fair Value estimate stands at $34.32, suggesting potential undervaluation. As investors consider GLJ Research's cautious stance, these additional data points from InvestingPro may offer a more nuanced view of Daqo New Energy's financial health and market valuation.
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