The Sun Is Not Also Rising Over Solar Stocks

We may be ready to enter a period of intensive private and public investment in alternative energy, but as of last week, the sun was certainly not rising over solar stocks.  The theme may have legs eventually, but not right now.

Some have predicted that Americans would lose their will to seek greater energy independence from foreign sources if oil prices declined significantly.  Oil prices have come down a lot, and solar stocks have done poorly.

Last week was a bust for the group.

click image to enlarge

Stocks in chart: (CSUN), (LDK), (STP), (SPWR), (SOL), (YGE), (JASO), (TSL), (ENER), (SOLF), (ESLR), (ASTI), (CSIQ), (FSLR), (WFR), (AKNS), (REC),(EMKR), (TAN).

This chart is available with weekly updates on our site.

See our Theme Dimensions article for additional thoughts on thematic investing.

Comments

[Bob55:]

Solar's drop in recent weeks has less to do with oil and more to do with the credit crunch that has been affecting all industries. Of course, questionable analyst reports downgrading the industry even though almost all companies continue to show strong earnings and strong guidance for the future does not help the situation. Oil and alternative energy will both play big parts in world energy policies. One should not feel threatened by the other. As for solar, I foresee prices coming down, demand up and good growth for many years to come especially as the credit market eases up.

2008 Oct 26 08:59 AM

[gebby:]

meanwhile the middle east is proving to be a huge market.

2008 Oct 26 10:00 AM

[NOWHEREMAN:]

Bob: from the tone of your response, you must own one or more of these Solar stocks and just "don't" get it.

The Article gives you a list of Solar stocks which have all been reamed. All were down 50% or more before "ANY" analyst came out with the View that they will be facing hard times. That's normal.

This happened in the "Internet, Housing, Ethanol, Financial, Commodity" Bubbles before the Solar turnaround to the Downside. Each of them had nowhere to go but up and each has Tanked. Solar hasn't been "Singled" out, it is just the latest in a string of sectors where all of the Solar stocks rose in tandem just because the Company Had the Name Solar attached to it. Now they have to prove that their earnings match the previous Hype. If they do, those that do will be bid up again BUT don't expect them all to match what was previously expected in the current Economic environment.

What don't you understand about "Financial Crisis" and "Credit Crunch". Solar has a Great future.

I know it has a Great Future because the Middle Eastern Country of Dubai has started construction of that area's largest Solar complex. A one Million square meter Facility which is expected to be finished within 2 years and will be able to produce Panels as large as 5.7 square meters. They do not have Environmental, credit or energy constraints. They will be able to produce a lot cheaply. That translates into stiff competition just a few years down the road. This is a Country doing the Financing and Construction not a Company.

It is something the US should be doing now but "one crisis at a time" and who can we "Blame Now" seems to be the Motto here.

I guess that you want to blame somebody. Blaming analysts is Good but you should be blaming them for not telling you to get out 6 months ago rather than after "the horse has left the barn".

2008 Oct 26 10:11 AM

[NOWHEREMAN:]

Instead of Importing, The Middle East will be exporting.

FYI, currently the Mid East provides 4% of the Worlds Aluminum Smelting, They expect to increase this to 10% within 15 months. Aluminum is an energy intensive Industry.
The warmongering Iran which last week stated that they should attack Israel before they get attacked is in the process of building 8 steel production plants simultaneously. Kuwait is Building its 4 th Major Refinery.

Everyone seems to be focusing on the cities being built in the Middle East. No one seems to focus on the Industrial Complex being built at the same time.

2008 Oct 26 10:28 AM

[Fred W:]

Actually much of the construction in Dubai has been funded with debt from the very banks that are now under tremendous pressure. The Middle East is not immune. imo-We have only just begun to feel the real pain that is coming...many rocks need to be overturned before the true depth of the situation can be appreciated.
Only the strong solar manufacturers will survive...at this point fslr and spwr are the only ones that I consider to have any real strength. Having a backlog of orders means very little if you can't make a profit on the sale (eslr is a prime example of this ineptitude)

2008 Oct 26 11:19 AM

[John Petersen:]

Coal and nuclear are pariah technologies and we're spending a third of a trillion dollars a year for oil imports. The economy can no longer support that kind of annual bloodletting. Solar and wind are the only rational way out of the mess we've created. That makes solar manufacturers essential infrastructure companies. It will be survival of the fittest, but the fit will certainly prosper.

2008 Oct 26 11:50 AM

[gebby:]

many solar companies are making money already and seem to be trading on extremely low multiples to earnings? it is my opinion that the need for solar is so great(global warming) that whatever is manufactured gets deployed. the analysis consistently leaves out global warming. global warming by fossil fuels is real. so which solars do we buy now? fslr, spwr, and which other stocks? ldk? stp? csiq? sol? solf? eslr? wfr?

2008 Oct 26 11:55 AM

[ruserious:]

It's hard to take a guy like paultaut seriously when he Capitalizes every third Word just because it's a Noun. Paul, the Internet is a marvelous thing. You can rectify one aspect of your pesky illiteracy just by googling "capitalization" and "rules."

2008 Oct 26 12:51 PM

[Bob the Bear:]

I notice that no one mentions ENER. They probably have the best program in the solar business. They are well financed, have take or pay orders into 2010, and produce the least expensive product, plus they make good money!

2008 Oct 26 12:51 PM

[HiddenStreet:]

Solar stocks are obviously being punished severely because of so many aggressive hedge funds having to lop off chunks of their portfolios to meet their call requirements. It really is amazing that the solar industry is one of the only industries with growing revenues and profits, and raising estimates across the board. Most companies in the industry have multiple multi-year contracts and surprising demand growth, yet have been meeting the product demand ahead of schedule. Also, many solar companies have plenty of cash from profits as well as lucrative fund raising just before the credit tightening scare. Analysts are concerned about the credit crisis affecting solar customers, but the solar companies already have enough contracts to keep themselves busy until he credit markets free up, a year or more from now. Also don't forget, solar customers save millions a year in energy costs by going solar. So it's a cost savings investment that makes sense even more when times are financially challenging. Wal-Mart and several other major retailers have already stated they will be putting panels on their buildings once the next wave of US alternative energy credits are extended.

As aggressive hedge funds are liquidating their positions leaving these obvious growth companies at ridiculously low PE multiples, I'm gladly collecting shares in one of the most proven and optimistic industries on the globe. While most the S&P 500 say their next year growth is in question, most solar companies have been upping their estimates for 2008 and 2009. Solar is the only industry I'm truly confident in these days.

2008 Oct 26 01:27 PM

[André Sautou:]

I will not be surprised when I hear that the pharaonic construction in Dubai has been built on a tremendous financial bubble and then crumbles down like a splendid card-castle ...

2008 Oct 26 01:30 PM

[scfranklin94:]

Wait till either the credit markets get healthier or crude makes a bottom (both will probably happen about the same time). If crude drops to $50 or below, solar stocks will drift down due to lack of credit/urgency by utilities to invest.

As for Dubai's investment in solar, my prediction is that it will get axed as Dubai starts to get hammered by the credit crunch and lower crude prices. The biggest creditors of Dubai are Kuwait, the Saudis and the UAE. It was one thing when crude was over $100 and the oil producing states were looking for a home for their cash; it's another thing when they're trying to stabilize their national budgets that have grown rapidly in the last two years.

2008 Oct 26 01:34 PM

[tessant:]

This huge drop in solar share prices has turned into the opportunity of a lifetime. Numerous companies are trading below their IPO price. Time to gobble them up.

Scott
solarfeeds

2008 Oct 26 03:40 PM

[Carlibra:]

"Most experts expect the U.S. to become th No. 1 solar nation in the next decade, says Julia Hamm, executive director of the Solar Electric Power Association.

San Jose Mercury News
Oct. 21, 2008

2008 Oct 26 07:21 PM

[Bob55:]

Do I believe solar can grow in this time of financial crisis? I most certainly do as the credit crunch is slowly but surely is being addressed worldwide. Maybe I'm in the minority at the moment but I'm putting my belief that what is being done by our government and other governments around the world will work to shorten this worldwide recession if this is indeed what we're heading into. And even while we are in these rough times, do I think solar is going to stop growing altogether, maybe even contract, to account for this beating that solar stock prices have taken? Most certainly not. HiddenStreet has it right when he mentions the multi-year contracts and high cash reserves most company have and, coupled with strong earnings, their fundamentals are strong. In addition to this, the 8-year tax-credit extension WILL be a major factor in growth here in the U.S. even though it's been downplayed or hardly mentioned at all in those analyst's report downgrading the industry. Banks will soon start lending again and solar projects will get funded. Politics, always a major factor in solar, is also hardly mentioned as government mandates may eventually be pushed through at the Federal level depending on what happens this Election Day, or at the very least be pushed at the state level as other states join California to promote alternative energy as an initiative to fight global warming and foster oil independence. Yes, we solar investors have been taking our lumps as of late, and investing in this sector is not for the faint of heart, but I foresee a better, stronger future ahead for the industry and I'm willing to stay in it for the long haul to see it come to fruition. Maybe what it takes is for a great many private investors, big and small, even foundations whose cause is altruistic and believe alternative energy will make a difference for the betterment of the world can start buying up shares instead of the hedge funds that have been wreaking havoc on the market as a whole. Maybe things will stabilize then and turn to the upside but I guess it's wishful thinking. I'm hoping it's not.

2008 Oct 26 08:38 PM

[briando:]

Bob55, I will do my part in the purchasing solar stocks at a great discount!

2008 Oct 27 01:10 AM

[NOWHEREMAN:]

Go for it. Buy em. do it now. don't wait.

John, you should know better. You have seen first hand that Technology alone is not sufficent to make a stock go up.

r u serious, I notice ONE thing about your post. You are defintely not interested in the sector. You r not serious enough to put forth any idea whatsoever.

In Bear Markets, even good companies go down.
Anyone hear of a Company named du Pont. Been around for a few years, PE of 8.22. It just broke to a 13 year low. Chemical Company, feedstock oil, profits will surely go up since their raw material prices are going down. Instead, this grand old company is tanking.

Take the cue, don't get involved with Solar Yet, emphasis on yet. I'd love to be able to emphasize words in these posts.

Hey! ruserious, do you know how to underline words in these Posts? Maybe you can help me.

2008 Oct 27 02:21 AM

[Bob55:]

You'll find the majority of alternative energy investors have a passion for what they're investing in. I'm one of them.

I agree with you only that every investor has to decide when is a good time to jump in. It'll help greatly if they do something about short selling which appears to be rampant market-wide.

While I agree good companies go down in bear markets, good companies can also thrive given the right government help and incentives.

2008 Oct 27 01:04 PM

[Road Runner:]

Let’s not lose perspective on oil prices. It "feels" like we are back to cheap oil with the current price around $60/barrel, from $147/barrel. This may lead us to "feel" like there will be a less interest in alternate energy, especially currently expensive solar. However, oil is still historically expensive. Oil has been above $50/barrel for only the last 4 years. Just 5 years ago, oil was $27/barrel (singing in the streets).

We are not going back to sub $50/barrel oil because of increasing demand in emerging markets, limited supply (peak oil), and higher cost to produce the “last barrel”. Thus, in-my-opinion, there will continue to be plenty of interest in alternate energy including solar.

Note about the “last barrel”. It doesn’t matter that Saudi Arabia can produce oil at $7/barrel. What matters is the highest cost for producing a barrel. That is where the supply and demand curves cross. If the price of oil drops below the cost of the “last barrel”, that barrel will not be produced which will limit supply and push prices back up.

www.gasbuddy.com/gb_re... Check “Show Crude Oil Price”.

2008 Oct 27 01:11 PM

[Bob55:]

Thank you, Briando.

2008 Oct 27 01:32 PM

[Stockguy456:]

Who are your top picks?

2008 Oct 27 04:47 PM

[QVM Group:]

Stockguy456

No picks as of now

2008 Oct 27 07:56 PM

[NOWHEREMAN:]

PS, I love the Solar sector. I especially like YGE and TSL. I just would like to see some of these stocks go sideways for a while instead of whipsawing everyone with lower lows.

China wants solar to provide 20% of their energy needs within 10 to 20 years. They have an energy policy. YGE and TSL are both Chinese and vertically integrated but after having invested some in the mid-teens, I am unwilling to invest more until I "see the whites of their eyes", so to speak.

I am not against the Solar Sector, I just want to see it stabilize first.

2008 Oct 27 11:01 PM

[Bob55:]

Stability is something all investors are looking for nowadays, most especially in the solar sector. Perhaps the solidification of an energy policy for the next presidency can finally do that.

2008 Oct 28 11:47 AM

[easywideopen:]

I guess the next generation of vehicles will be digital and run on nickel hydide batteries charged for free with solar even the rest areas will offer wifi and free solar charging for your vehicle no wonder the short selling is being done by those big oil and big nuclear this 700or800 billion$ they make from foreign oil is in jeopardy.

2008 Oct 28 12:56 PM

[firechief1son:]

when the democratic president Carter put solar photo voltiacs on the whitehouse roof solar was primitive maybe 2-3% efficient now its concentrated photo voltaics at almost 20% efficiency soon the super concentrated photo voltaic will arrive but If louisiana is going to pay almost 90% for me to have free electric to charge my new tesla that goes 0-60 in three seconds this is a future coming fast. Of course the oil and coal and nuclear will cost too much and polute to much so why wouldn't dubai with all their oil want clean free energy

2008 Oct 28 12:59 PM

[firechief1son:]

As usual the big money interests are selling the solar by shortselling when they realize they can buy them for a fraction they will cover their shorts and buy solar cheap after all those solar cells u put on the roof last for 30 yearsof free electric to run ur new robotic lawnmower and gm's new volt or do u have a toyota prius or a Honda electric car does big oil want to get into solar on the floor of wall street or will we borrow another half a trillion $ from china to pay for solar like at walmart only a half hour of sunlight could supply enough electric for a year if harnessed.

2008 Oct 28 01:24 PM

[firechief1son:]

THE ONLY WAY 6 BILLION HUMANS CAN LIVE ON EARTH IS WITH FREE ELECTRIC FROM NON POLUTING LOW COST (almost free with government helpalready available) SOLAR AND WIND.

2008 Oct 28 01:30 PM

[firechief1son:]

If big oil,big electric and big utilities were to monopolize little solar they could share in the wealth by putting wind farms on solar deserts and cut their carbon footprint in fractions; if not the little home user may beat the public utilities and big oil and big electric.

2008 Oct 28 02:46 PM

[NOWHEREMAN:]

firechief: you hit it on the head in your 2nd post. Why would I want to buy solar stocks now while the Bears are rampaging among them forcing price declines?

Waiting for them to stop destroying solar companies is a better option at this point. And it does create greater value for the patient investor.

Dollar cost averaging on the way down is one way of investing. I prefer a different route. I would rather miss the first 10% of upside and then dollar cost average on the way up.

2008 Oct 28 03:13 PM

[Bob55:]

I am just grateful for an up-day today. A small consolation for so many down days but one I'm appreciative of nonetheless.

Reading blogs from Barron's and you will get the sense of dismay and outright outrage at the continuing campaign of downgrades. Today, an UBS analyst cuts estimates on a number of solar stocks -

blogs.barrons.com/tech...

so, yes, there is a sense that there is a campaign to destroy solar just as you mentioned. This is just one in a string of articles appearing on Barron's where respondents have displayed such strong disagreement at the validity of the analyst's estimates. After a while, downgrades will only go so far. When you go week after week downgrading stocks, when does it stop being effective and the market starts saying "Hey, this industry has to be worth more than that!!!". I'm hoping this realization comes soon. Very soon.

2008 Oct 28 05:50 PM