According to Axiom Capital analyst Gordon Johnson, Trina Solar Limited (NYSE:TSL)’s, “earnings have peaked (due to more shipments going to China vs. Japan for the balance of the yr, & higher shipping costs in China vs. Japan), w/ sig. downside likely in 2H14 vs. current Consensus ests., exacerbated by what we feel is a forthcoming large dilutive capital raise, we see now as an opportune time to be shorting Trina Solar’s stock following yesterday’s +30% move.”

Trina Solar

Johnson is ready to SELL Trina noting, “as Trina Solar Limited (NYSE:TSL) grows its mix inside China (lower ASP/lower margin biz), we see outsized risk to 2H14 Consensus ests.”

Johnson argues, “even with a huge surge in installations in China in 2H14 (a conclusion that appears increasingly at risk of disappointing), as well as what we are modeling as 125MW of projects sales for Trina Solar Limited (NYSE:TSL) in 2014 (a feat we see as highly risky given the delays the company is experiencing getting permitting for its projects), earnings have likely peaked, & a large dilutive capital raise is likely to emerge over the very near-term.” And, “as it becomes clear to solar market pundits that 2H14 fundamentals are slated to move decidedly lower, even should Chinese demand come roaring back, we see outsized risk to Trina Solar’s share price.”

There have been improvements in Trina Solar’s balance sheet, but Johnson notes, “we think the primary component to the improvement in Trina Solar Limited (NYSE:TSL)’s balance sheet stems from wider-than-expected gross margins providing a much-needed boost to earnings and, thus, the company’s cash balance. While we certainly “tip our hats” to Trina’s clear improvement, with a balance sheet hovering, just last quarter, in what we viewed as the nethermost realm of practicable solvency, we stress that – barring the option of bankruptcy – the only direction for Trina Solar to have gone in the latest quarter was up.”

There is “outsized rick to Trina Solar Limited (NYSE:TSL) missing its projects sold guidance,” as well.

Gordon Johnson recommends SELL Trina Solar Limited (NYSE:TSL), with an $8.00 price target. He has an +11.1% average return per recommendation and a 66% success rate of recommendations.

Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]