There's a general agreement that solar power is a good idea and that we need to focus on alternative energy sources if we are to keep our planet going. However, two major players in the market, namely First Solar (FSLR) and General Electric (GE), have experienced some serious setbacks recently. I will look at how these setbacks are affecting stock prices for each company. I will also examine competitors Evergreen Solar (ESLRQ), Suntech Power (STP) and JA Solar (JASO).
Unfortunately for solar companies, bankruptcy has been a major theme of late. When China entered the solar panel market the manufacturers chose the lower-tech crystalline silicon technology mostly because the prices were low at the time. So that means that the favor at the moment lies strongly with silicon based products. Other companies, such as First Solar and General Electric are therefore suffering as a result as they do not base their products on this technology. What is the effect on First Solar, a company that uses thin-film modules? Well, over the last two years the company's shares have declined by no less than 88%. However, despite the various bankruptcies that have occurred in the market, First Solar stock is heading up at present. I also feel that it will continue to head up in the next few weeks, so it is a stock that is worth keeping an eye on. While other solar panel companies fail, First Solar remains unaffected for the most part. For example it has increased in value by a third, and, when you consider its 52 week range of $11.43 to $132.78 (which highlights the huge fluctuations) its current price of around $15.50 is a bargain. I think First Solar stock has a bright future and will continue to improve over time.
The situation has also had a significant impact on General Electric. Recently, the company had to halt production of an important and highly publicized solar power business as a direct result of a decline in the sale of solar panels. Although the company has stated that it plans to utilize the time efficiently to create better products that will also be more cost effective, there is no denying that this news is a major setback for the stock and will most likely affect its future stock prices. When the news was announced that the company would be building the solar business there was a sharp increase in its stock price, an increase that continued to be evident up until now. In total, the stock rose by around 30%. However, following the news that construction has been halted the stock has declined, so far, by around 0.5 percent, and I feel that we are in for an even further decline as time progresses and the news of the halt becomes more widely apparent. As the delay will last for around 18 months, I do not think we will see a remarkable recovery in General Electric this year or even next.
Evergreen Solar is one of the companies that have been forced into bankruptcy lately due to the serious decline in the sale of solar panels. This is one competitor that is out of the running, then. Included in the reasons for bankruptcy is the fact that there is strong competition from China and that there have been huge subsidy cuts in Europe. Competitor Suntech has had more luck. As compared to other solar companies this company managed to weather the increased competition form China quite easily and has even raised prices. This means that, as solar stocks go, this is one of the better options for you to back. The benefits of the situation on the company's stock can be seen in the fact that, although it is only trading at $2 per share (low when considering its 52 week range of $1.50 to $7.98), the stock has improved by more than 11% recently and I feel that this increase will definitely continue. Chinese solar companies are not necessarily doing so well themselves. Take JA Solar, for example. This company has a lot of debt to face at present and has had to resort to a share buyback scheme in order to account for the bad position that it is in. although General Electric and First Solar are in trouble, in comparison to several of their competitors they are still leaders in the solar panel industry.
The conclusion is that there are clear winners and losers in the solar panel industry at present. First Solar is a winner and should recover significantly in the coming quarters as a large portion of its competition has been removed. I believe General Electric, on the other hand, will likely experience a significant decline and will only recover when plans for its solar power business are back up and running and being implemented. Generally speaking, these are still the best two stocks to keep your eye on in this industry, as even with these declines, they are still the strongest players.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.