Trina Solar Cuts Guidance, Remains Optimistic

Aug. 3.11 | About: Trina Solar (TSL)

Trina Solar (NYSE:TSL) was out lowering guidance yesterday and it’s no surprise. We’re still seeing warnings from solar companies that continue to reel a bit from the Italy and Germany subsidy changes. The company said that despite record shipment volumes, it's expected to come in considerably lower than previously thought. Shipment volume estimates go from 430-450MW to 395-397MW, while gross margins related to in house production drops to 20% from previous estimate of 25%. Overall margins drop to 17-17.5% from the low 20s.

On a positive note, the CEO remains optimistic that things will improve and the company is reiterating its full year shipment outlook of 1.75-1.80GW, which would be an increase of 65-70% over last year.

CEO Jifan Gao commented:

While shipment volumes in the second quarter were our highest ever, sales were adversely impacted by extended slower demand and high industry inventory due in part to recently issued regulatory revisions and reduction in solar subsidies in Italy. We expect a significant improvement in production costs and an increase in shipment volumes in the third quarter.

As market demand conditions improve, we see a significant increase in pipeline from our distributors and large commercial and utility segment customers across Europe and North America. We are in discussions with new and existing customers to secure a growing number of sales agreements that cover the second half of the year.

Trina Solar reports official results before the bell on August 23.

Technically, the stock remains under significant pressure and remains in a firm downtrend. I’ve been saying this for awhile and the song remains the same: While solar stocks are showing some signs of stabilizing, it’s still too soon to jump in. Perhaps all the bad news is built in and once these companies actually report official results, traders will buy the news. Until I see buy volume begin to overshadow sell volume and some resistance levels taken out, I can’t be confident that a bottom is in.