Daqo New EnergyNYSE: DQ

Intelligent investors actively seek out sleeper stocks. These businesses hold substantial growth potential, yet investors frequently disregard them, often overlook their value, and might miss out on significant profits if not discovered early.

Back in May, sitting U.S. President Joe Biden announced he would be quadrupling tariffs on Chinese solar imports among other technologies and commodities like electric vehicles, batteries and steel. The move signals an increasingly cooling relationship between the world's first and second largest economies but has also underlined a group of Chinese solar stocks to sell.

Daqo New Energy (DQ) reported quarterly earnings of $0.24 per share, falling short of the Zacks Consensus Estimate of $0.56 per share. This is lower than the $3.52 per share earnings reported in the same quarter last year.

It is probable that Daqo New Energy (DQ) benefitted from increased prices, strong demand for polysilicon, and efforts to enhance efficiency in the first quarter.

We are recommending a Buy on DQ, despite decreasing spot prices, increasing pessimism about Chinese ADS, and potential solar tariffs. The stock is trading below its book value per share, thanks to a strong balance sheet and consistent share repurchases by management. DQ is well positioned to handle uncertainties in the short term, with polysilicon prices nearing cash costs and global capacity expanding in the coming years.

Daqo New Energy holds a majority stake in its subsidiary Xinjiang Daqo, which is listed on the Shanghai Stock Exchange. Daqo is trading at 29.9% of the NAV of the stake in the Chinese subsidiary, which translates into an upside of 235%. There is significant operating leverage in the polysilicon price, potentially adding further upside to the discount to NAV.

XRX, REYN, TRUMY, DQ and STR have been added to the Zacks Rank #1 (Strong Buy) List on March 28, 2023.

XRX, REYN and DQ made it to the Zacks Rank #1 (Strong Buy) value stocks list on March 28, 2023.

The mean of analysts' price targets for Daqo (DQ) points to a 28.5% upside in the stock. While this highly sought-after metric has not proven reasonably effective, strong agreement among analysts in raising earnings estimates does indicate an upside in the stock.