HSBC Flags Daqo as a Solar Value Play—Is the Turnaround Here?

Daqo New Energy Corp. (DQ), a leading supplier of high-purity polysilicon for the global solar photovoltaic (PV) sector, just received a significant vote of confidence. HSBC Securities has upgraded the stock from "Hold" to "Buy" and set a new price target of $31, suggesting a meaningful upside for investors willing to navigate the solar industry’s cyclical risks. This upgrade arrives as Daqo emerges from a challenging period of earnings volatility and sector headwinds—raising the stakes for investors evaluating whether the worst is behind the company.

Analyst upgrades, particularly from globally recognized institutions, often serve as catalysts for price movements, especially when they signal a reversal in sentiment after a tough stretch. HSBC’s move comes as the solar supply chain finds its footing and as Daqo embarks on capital return initiatives, notably a $100 million share repurchase program. In this report, we dig deep into the rationale behind HSBC’s upgrade, Daqo’s recent financials, and the broader strategic context for solar investors.

Key Takeaways

• Potential Upside: HSBC’s $31 target implies a 33% upside from current prices near $23.33.

• Stock Price Action: Daqo’s shares have drifted lower recently but are showing signs of technical stabilization, with a 20-day EMA at $22.40 and an RSI near 63, suggesting building momentum.

• Recent News: Q2 results showed a loss, but the company outperformed consensus estimates, and a $100 million buyback signals management’s confidence.

• Sector Positioning: Daqo remains a cost leader in polysilicon, and HSBC’s upgrade reflects renewed analyst conviction despite ongoing industry volatility.

Why HSBC’s Upgrade Demands Attention

The Analyst: HSBC Securities’ Global Reach and Sector Expertise

HSBC Securities is among the world’s largest and most globally integrated financial institutions. Its research arm commands significant influence, especially across Asia and emerging markets—key regions for solar supply chains. The shift from "Hold" to "Buy," with a $31 target, marks a meaningful increase in conviction. HSBC’s coverage is known for deep sector expertise and rigorous risk assessment, making this upgrade particularly noteworthy as it aligns with technical and strategic inflection points for Daqo.

Analyst Confidence: HSBC’s upgrade reflects deep sector expertise and conviction.

Daqo’s Business Model: A Pure-Play Polysilicon Powerhouse

Daqo New Energy is a vertically integrated manufacturer, specializing in high-purity polysilicon, the essential raw material for solar PV panels. The company’s Xinjiang-based operations benefit from low-cost energy, enabling Daqo to maintain industry-leading cost structures even during down cycles. While the polysilicon market is notoriously volatile—prone to oversupply and price swings—Daqo’s operational discipline and focus on quality have historically enabled it to weather downturns better than most competitors.

Stock and Financial Performance: Volatility Meets Resilience

Recent Stock Price Action

Daqo’s shares currently trade near $23.33, down from a recent high of $30.85 over the past year but well above the 12-month low of $12.41 set in late April. Technical indicators point to a stock in consolidation:

• 20-day EMA: $22.40 (suggesting support)

• RSI: 63 (momentum building, but not yet overbought)

• Bollinger Bands: Lower at $20.29, upper at $24.07 (stock trading near the upper band)

Volume has averaged 1.1 million shares per day, with notable spikes around earnings and the buyback announcement. Although the stock is off its highs, the price action hints at a base-building phase, potentially priming for a breakout if sentiment continues to improve.

Financials Snapshot

Recent Q2 results were mixed:

• Earnings: Daqo posted a loss of $1.14 per share, slightly better than the $1.16 loss forecasted by consensus, and markedly improved over the $1.81 loss a year ago.

• Revenue: Lagged estimates, but the company maintains one of the lowest production costs in the industry.

• Balance Sheet: The newly announced $100 million share repurchase program underscores a healthy cash position and management’s willingness to return capital to shareholders.

Key Quote from Q2 Call

"We are confident in our ability to navigate the current downcycle, supported by our industry-leading cost structure and prudent capital allocation."
— Xiang Xu, Chairman & CEO, Daqo New Energy, Q2 2025 Earnings Call

Recent News Flow: Tactical Moves and Market Sentiment

• Earnings: While the Q2 loss was notable, outperformance relative to consensus and year-over-year improvement buoyed sentiment.

• Buyback Announcement: The $100 million repurchase program, effective immediately through 2026, marks a significant commitment to shareholder returns and may support the stock during periods of volatility.

  "The board of directors has authorized Daqo New Energy to repurchase up to US$100 million worth of its own... shares in open-market purchases, negotiated transactions, or block trades." — PR Newswire

• Sector Dynamics: The global solar sector continues to face pricing pressure and overcapacity, but Daqo’s cost position and management actions position it favorably for a cyclical upturn.

What Does a 33% Upside Signal for Investors?

HSBC’s $31 target represents a roughly 33% premium to current prices. This potential return is significant, especially in the context of macro uncertainty and sector volatility. For long-term investors, the upgrade signals a potential inflection point—provided Daqo can leverage its cost advantages and capital discipline during this challenging phase for solar supply chains.

Technical and Sentiment Backdrop

• The stock’s RSI near 63 suggests building strength without overheating.

• Recent price stabilization above the 20-day EMA, along with a tightening of Bollinger Bands, hints at reduced volatility and a possible breakout setup.

• The buyback program could provide a floor for the stock and attract value-oriented investors.

Risks and Considerations

• Sector Cyclicality: Polysilicon prices are volatile; a prolonged downturn could limit upside.

• Geopolitical Risks: Daqo’s Xinjiang operations remain a source of potential regulatory and reputational headwinds.

• Execution: Successful navigation of the current downcycle is critical; any missteps could quickly erode sentiment.

Conclusion: A Turn in the Solar Cycle or Another False Dawn?

HSBC’s upgrade of Daqo New Energy to "Buy" with a $31 target is a noteworthy development for sophisticated investors. The combination of technical stabilization, operational discipline, and capital return initiatives makes Daqo a compelling turnaround candidate in the solar materials space. While risks remain, the 33% potential upside flagged by HSBC is hard to ignore for those with the risk tolerance and sector insight to navigate the next phase of the solar cycle.

Bottom Line: HSBC’s upgrade is more than a routine rating change—it’s a signal that the tide may be turning for Daqo and, by extension, for select players in the global solar value chain. Investors should watch for continued operational execution, further buyback activity, and any signs of improving solar sector demand as key catalysts moving forward.