A few months ago people were writing about a “solar halo” over stocks involved in solar energy, since costs were dropping, shipments were rising, and there seemed little opposition to equipment installations.
Now the sector has devil's horns due to over-supply of this generation's panels, slowing sales due to high installation costs, and Chinese competition.
Nowhere is this more obvious than at Applied Materials (NASDAQ:AMAT), which helped pioneer the polysilicon panel space. Net income tripled on higher revenue last week, beating analyst estimates, and the stock tanked.
Applied's big new product right now is a solar-cell printer called Pegaso. It enables mass production of lower-cost-per-watt cells, with less breakage, and production of double-sided cells to increase efficiency. The line is being shown in Asia and drawing strong interest.
Pegaso's predecessors gave the U.S. a $1.88 billion trade surplus in solar products during 2010. But now that the machines are going into production, prices on the older panels are falling rapidly and new panel prices are expected to be even lower, on a price-per-watt basis, than ever before.
You can argue that this is the way silicon manufacturing is designed to work, and you would be right. But when analysts get bearish, good news becomes bad news, and bad news is still bad news. Expect short-sellers to make money on AMAT for the foreseeable future, although when the clouds lift, the company will do quite well.
Additional disclosure: I used to own some Applied, years ago, when my brother-in-law worked there. He's retired, and I've sold the stock.