Barclays analyst Vishal Shah started off the week in solar with a bang, upgrading Suntech Power (STP), SunPower (SPWRA), and JA Solar (JASO) and identifying the trio as his top picks. Mr. Shah, part of a DOE-sponsored working group trying to figure out the cost of getting the U.S. to 10% to 20% solar by 2030 (hint: it's in the trillions), has a fat $35 price target on SunPower -- more than 50% above the current price. Other investors are clearly more bothered by the firm's accounting irregularities.
Yingli Green Energy (YGE) announced a decent German supply deal this week, but Suntech Power stole the spotlight with a trio of agreements with various European players totaling around 10 times the size. These Suntech supply deals are back-weighted through 2012, while Yingli's 51 megawatts are going out the door next year, so it's not like the former company is running circles around the latter.
A report by DisplaySearch found that solar cell capacity will grow 56% this year, to more than 17 gigawatts (GW). Demand, meanwhile, fell to a touch north of 5GW. The good news is that capacity growth should slow over the next two years, while demand will almost certainly resume its prior uptrend.
The outlook for polysilicon is a bit different. A Soleil analyst warned this week that poly supply could increase by around 70% over the next three quarters. The parade probably won't end there, either. OCI, the former DC Chemical, just rebooted its phase buildout, and is spending over $858 million to boost its poly production capacity by 2011.
This preponderance of poly could make life pretty interesting for ReneSola (SOL) and LDK Solar (LDK). The latter firm in particular has a difficult debt load to deal with, so another round of price cuts for its silicon wafers would complicate matters. LDK is rumored to be considering a spin-off of its polysilicon business, but it's hard to see much investor interest forming around such an offering, given the near-term oversupply situation. Thin-film player Trony Solar had to pull its IPO this week, and that company faces fewer near-term headwinds.
Remember when Taiwan Semiconductor (TSM) announced its solar ambitions back in June? The firm made a key move this week, scooping up 20% of solar cell player Motech. I expect TSMC to become a formidable solar player over the next few years. Panasonic (PC) may be another one to watch, seeing as the firm has just picked up a majority stake in Sanyo Electric (OTC:SANYY).
Disclosure: Author doesn't have a position in any company mentioned.