Daqo New Energy's Earnings Miss and $100M Buyback Plan: A Valuation Reevaluation

Daqo New Energy (NYSE:DQ) has reported a significant drop in quarterly sales and net loss. However, the company unveiled a $100 million share buyback authorization, signaling confidence in its long-term value. Shares have nearly doubled over the past year, but the stock's volatility has raised questions about its valuation. Analysts believe the company is overvalued, with a fair value of $24.43, driven by strong demand growth and sector leadership projections. However, industry overcapacity or delayed policy support could challenge this optimism.

Daqo New Energy Corp. (NYSE:DQ), a major player in the polysilicon sector, has been navigating a challenging quarter. The company reported a net loss of $76.5 million in the second quarter, a figure that was narrower than the previous year's loss but still indicates significant financial strain. Despite this, Daqo New Energy has signaled confidence in its long-term prospects by authorizing a $100 million share buyback program [2].

The share buyback authorization comes as the company's stock has nearly doubled over the past year, with a 26% surge in the last 30 days alone. This significant price appreciation has raised questions about the stock's valuation. While the company's price-to-sales (P/S) ratio of 3x might initially seem attractive compared to the broader semiconductor industry, a deeper dive into the company's financials reveals potential concerns [1].

Daqo New Energy's revenue growth has been lackluster, with a 63% decline in revenue last year and an 83% decrease over the past three years. This poor performance has led to a P/S ratio that is lower than the industry average, suggesting that investors are cautious about the company's future prospects. Analysts have forecasted a 59% annual revenue growth over the next three years, but this growth rate is still less attractive than the industry's projected 22% expansion [1].

The company's chief financial officer, Ming Yang, has expressed optimism about the sector's recovery, stating that the industry has marked a clear bottom and is already recovering. This sentiment has been reflected in the stock market, with Daqo's shares surging as much as 14% after Yang's comments [2]. However, the industry's overcapacity and potential delayed policy support could pose challenges to this optimism.

In conclusion, Daqo New Energy's share buyback authorization signals confidence in the company's long-term value, but the stock's valuation remains a point of contention. While the company's revenue growth projections are promising, the industry's overcapacity and potential policy delays could pose risks to this optimism. Investors should closely monitor Daqo New Energy's financial performance and the broader polysilicon sector for further insights.

References:
[1] https://simplywall.st/stocks/us/semiconductors/nyse-dq/daqo-new-energy/news/even-with-a-26-surge-cautious-investors-are-not-rewarding-da
[2] https://www.bloomberg.com/news/articles/2025-09-04/chinese-solar-maker-calls-turning-point-for-embattled-industry