Solar Stocks Show Signs of Life

Solar stocks capped a fantastic week with every solar stock except one (WFR) clocking a double digit gain. This seems like the best week solar stocks have had this year but are still far off from where they started in 2008.

click to enlarge

The biggies, First Solar (FSLR), Suntech Power (STP) and Sunpower (SPWR), all made impressive comebacks. I am kicking myself for not buying Suntech Power (STP) when it was in the 30's. I was closely watching it and was hoping to enter Suntech in the high 20’s. Well, before I knew it Suntech goes from 30 to 40 in a week.

The question is have the Solar Stocks turned a corner here? I don’t have the answer. Do you? Do you see this as an opportunity for a short-term short, or are you planning to go Long?

Disclosure: No holdings in any of the above mentioned stocks

Comments

[Dr. Duru]

A good way to answer the question is to juxtapose the news during the week that helped the solar stocks in the face of an otherwise weak stock market. I noted a few, there is likely more:

1. Solarfun's earnings (SOLF) - I consider this company questionable but the market temporarily interepreted the report as a big positive
2. Germany's Solarworld posted great earnings
3. News (rumors) early in the week that the Congress would extend tax credits and subsidies to bolster solar energy (seems that this is still at least a month away or more. I have read concerns that partisan politics could impede progress)
4. Several analyst upgrades and positive commentary on companies such as Jaso, Suntech, and Fisrt Solar
5. California announcing huge solar projects
6. FPL announcing it was getting into the game with a large solar utility project

So, the stars, so to speak, aligned last week to put a lot of momentum behind these stocks. If you believe that the recent news represents incrementally new good news, then you would be right to buy. If you think that this news just adds to the on-going noisy hype, sit tight.

I am personally sitting tight for now because many of the sharts seem over-bought in the short-term and the overall market's weakness is very likely to drag these stocks back down. I also do not like the way most of the solar stocks that reported earnings in the past month or so experienced quick pops that were quickly faded to ever lower prices. Very suspicious behavior for a sector that is supposed to have a lot of future positives.

2008 Mar 30 05:05 PM

[PA]

its all short covering last week.....will need to see if they hold

2008 Mar 30 05:53 PM

[sonya]

No doubt solar will soar long term..with economy as it is and where it's likely headed, people will continue to look for a quick buck and ride the solar waves. I think the investors are nervous and sketchy and not the sector. The sector is what it is..the cleanest, most consistently provided source of renewable energy, with the least maintenance required to produce it, the least impact on the environment and food sources-solar will grow by leaps and bounds..long term.

2008 Mar 30 06:03 PM

[Ames Tiedeman]

Many solar stocks have been crushed. One would think they can bounce here. Ethanol stocks have also been hammered into the ground.

2008 Mar 30 07:04 PM

[User 170287]

Lazard initiates JA Solar with buy, praises China solar firms
Marketwatch - March 28, 2008 10:57 AM ET


NEW YORK (MarketWatch) -- Lazard Capital Markets on Friday initiated coverage of JA Solar and issued positive comments on ReneSola and Solarfun after recent earnings and manufacturing updates from the trio of China-based solar energy producer

Taking aim at ReneSola Ltd. (SOL), Shrestha said he sees further upside for the solar cell manufacturer, as he lifted its profit margin view and upped his price target to $18 a share from $12 a share.

"We would not be surprised to see the multiple expand as the company continues to execute on its expansion plans and delivers solid financial performance," Shrestha said.

"SOL" has a great future and a $18 target, it is darn cheap and an excellent buying opportunity

2008 Mar 30 07:35 PM

[The Genius]

I'm long on Candain Solar (CSIQ)

2008 Mar 30 08:43 PM

[Philly Jim]

Solar companies seem like BS. I'll buy when I can buy their products in Lowes and Home Depot, until then, it all seems like a 70's pipe dream that will never translate into something the general population will use.

2008 Mar 30 10:44 PM

[ValueHunter]

Too early. These first players will be eaten alive by the second generation players like Nanosolar.

2008 Mar 30 10:53 PM

[RossFerg]

The entire market is a wave. If you want to make any kind of money in the solar game you need to follow the oil market.

2008 Mar 30 11:29 PM

[User 170287]

These stocks (SOL, FSLR, JASO,SOL) gave excellent 2 digit returns. I missed the bota for FSLR and JASO.

2008 Mar 31 04:52 AM

[User 170287]

FSLR and JASO have reached their peaks. Room for SOL has $18 target by Lazard. If I can get in the stock even at $12-14 it is excellent profit, whatever others say.

2008 Mar 31 04:57 AM

[Tim H.]

Himanshu, I bought STP at the price you are kicking yourself for not buying at: $30.51 on March 19th. I was kicking myself for not buying STP at $35 in August where it ran all way to $90 in january. I like long term view on Solar and to Phlly Jim who thinks Solar is a 70's pipe dream. News last week was Utility company in California is spending almost $900 mil to lease warehouses and put solar panels on them. Leading to cheaper, cleaner power. While it's tempting to take profits on such a runup in short time. I am going to stay long on STP. I am an investor not a trader. I am playing with house money at $30.50. Stop in at minus 10%.

2008 Mar 31 06:59 AM

[CliffA42]

Sold a third of my long position on YGE; think it's got potential for mid-20s. Traded out CY (which rides on SPWR), then picked it up again. Bid for STP missed in the low-30s, quel dommage! But think it can be picked up again in mid-to-upper 30s. Don't understand the beating WFR has taken while the rest of them were on the rise. For the time being, the solar space is a trader's market. For the long term, it ain't a fad. When the storage problem is solved (check out MXWL on that one), you will be able to buy a home installation system at Home Depot. That day is not far off.

2008 Mar 31 08:22 AM

[supershort]

These companies are trading at a tremendous multiple. SPWR over 600x earnings and they warned at last earnings. I think solar will do well in the future but at reasonable multiples. I am short any company with over 50 times earnings in a bear market which we are in. BGG, SPWR, ALGN, STP, AMT, MTN, SUP are my favorites for now.

2008 Mar 31 09:17 AM

[gebby]

long and staying long, trade the solars from the short side? that was yesterday look to the future. this week al gore is starting a 300,000,000 dollar ad campaign to increase awareness of global warming. it is real . the greater risk is not owning these stocks. risk here: 10 15 points down 20-100 points up over next couple of years.

2008 Mar 31 09:31 AM

[gebby]

the multiples of these stocks are NOT high. despite supershot. he is a bear

2008 Mar 31 09:32 AM

[dicki31785]

first of all those are trailing PE's supershot and if you look at the growth rates of these firms you will realize that those numbers are absolutly irrelevant....and @Phily Jim....just because in america you rather subsidize oil and gas firms for some reason doesnt mean their is not a market out their(just that market is not in america, so far, rather than that in spain, germany, and soon italy will boom too so take a look at spwr which positioned itself very well in italy as well due to a takeover of an italian firm)....and maybe it is wiser to subsidze alternative energies rather than to start a war for energy resources in other countries....saves a lot of money and more importantly lives...with kind regards from Germany

Disclosure: Long SPWR, CSIQ, and STP

2008 Mar 31 09:53 AM

[User 170287]

"SOL" entry point now. Target $18 by Lazzard

2008 Mar 31 10:00 AM

[gebby]

As further proof of the viability of solar's business model, there are big tech companies that have offer exposure to solar, such as Applied Materials (AMAT). The company recently announced that it had signed a $1.9 billion deal to supply and install equipment for "multiple solar factories" for a private company based outside of the United States.

Notwithstanding the recent pullback in stock prices, solar does indeed have a sunny future. Solar is still very early in its growth stage, and solar companies, particularly the producers of solar silicon and integrated modules, will experience more volatility as they navigate roadblocks such as supply constraints and market demand. Most of today's existing solar technologies are becoming more efficient and more affordable, and emerging technologies and manufacturing methods promise to keep the sector going strong. Even though solar stocks have taken a serious hit, that isn't a sufficient reason to sour on the long-term potential of the sector.

2008 Mar 31 11:37 AM

[gebby]

a 70's pipe dream? India unveils more incentives for solar power - EE Times

EE Times reports India's renewable energy ministry has announced a new program designed to expand solar power generating projects up to a maximum capacity of 50 megawatts. Solar developers who build, own and operate projects will be supported with financial incentives of about 30 cents for each kilowatt of solar power generated per hour. Incentives for thermal power fed to power grids would be slightly less, according to a govt statement. Faced with inadequate power generation and big transmission and distribution losses, the Indian govt wants to generate at least 10% of its electricity through solar power by 2012. A total of 33 solar photovoltaic power plants connected to the Indian power grid have already been built with govt support. The plants are expected to generate 2.55 mln units of electricity annually.

2008 Mar 31 01:03 PM