Solar Stocks Go Nuts On Supply Agreements

Something truly odd is happening with the solar stocks. The sector went slightly nuts Monday, as one company after another announced new supply agreements or other related announcements. Here are the basics of the announcements, with links to the full texts, followed by the stock activity.

First Solar (FSLR): Announced five deals to make solar modules totaling 685 megawatts by the end of 2012; the company says the deals can bring in as much as $1.28 billion over the length of the contracts. The contracts are with a bunch of companies that you likely haven’t heard much about.

JA Solar (JASO): Announced that it has commenced production on four additional solar cell production lines. The company said it's ahead of schedule. The four new lines increase its manufacturing capacity to 175 MW a year from 75 MW.

Trina Solar (TSL): Said it signed four contracts to supply 99 MW of worth of photovoltaic modules to customers in Italy and Germany.

Yingli Green Energy (YGE): A week ago, the company announced a deal to supply 9.55 MW of PC modules to a Spanish customer.

Hoku Scientific (HOKU): On June 20, the little Hawaiian company’s shares went skyward after it announced a polysilicon supply deal valued at $185 million over seven years.

OK, so check out Monday’s solar stock madness:

First Solar rose $23.05, or 24%, to $119.34.

JA Solar gained $5.51, or 15%, to $42.76.

Trina Solar rose $9.29, or 16%, to $67.37.

Yngli Green Energy advanced $2.46, or 16%, to $17.96.

Hoku jumped $1.52, or 14%, to $12.65.

Solarfun (SOLF) improved $1.28, or 11%, to $12.53.

Suntech (STP) gained $1.57, or 4%, to $39.56.

LDK Solar (LDK) gained $2.84, or 8%, to $36.37.

To be clear: those are the gains Monday alone, not this month or this year.

Are those gains justified? I have no idea. But if ever a sector looked frothy, this is it.

Comments

[RBuck]

Eric . . . Your reporting gives reason to the jump in clean energy ETFs Monday. Are profit measures a thing of the past? Is the new action all tax subsidies?
Buck Gray, Pittsburgh

[Camden]

"Are those gains justified? I have no idea. But if ever a sector looked frothy, this is it."

He has no idea if the gains are justified – but he's certain the sector is frothy. ???!!!

[WalterMorton]

Impressive in the face of some fears that solar has been a "bubble" of investor enthusiasm. However, the enthusiasm may actually be supported by the many reports coming out in recent days and weeks about the sharp rise in demand for oil, the high cost of power plant construction, and a global-warming driven desire for workable "green clean" energy. Solar, despite the problem of low-efficiency, is shaping up to be more attractive than wind, ethanol, nuclear, etc. in many applications. The sun isn't going anywhere, and is the most reliable energy source we have.

[widicusf]

The game will be won by those who can profit from these large orders...be careful of the equity players behind these new deals. Efforts to bump up revenues before a lockup period ends should be considered. VC guys love to cut these type of deals before they cash out.