German Subsidy Fears Trigger Solar Downgrades 23 comments
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Shares of solar power technology firms are tanking following a note from Merrill Lynch analyst Mark Heller cutting his rating on SunPower (SPWR) and Evergreen Solar (ESLR) from “Neutral” to “Sell” because Germany’s government may cut subsidies for solar by as much as 25%. Subsidies are currently necessary to goose investment in solar power in many countries.
According to the Bloomberg account of things, Heller thinks analysts’ expectation of a 16% cut is too low. “An increasing number of politicians are advocating a bigger cut to the German solar subsidy due to the escalating cost,” Bloomberg quotes a Merrill analyst, Matthew Yates, as writing in the report. The note follows another note that came out yesterday from Calyon Securities analyst George Kotzias that claimed the escalating burden on taxpayers was prompting the German government to consider cutting the subsidy by 15%, according to the Associated Press. The US’s own investment tax credit is a looming issue for solar later this year and next.
Update: In the Merrill Report, which just appeared over the transom, I note that First Solar (FSLR) is kept at a “Buy” rating, while lowering the bank’s price target on the shares to $325 from $360. First Solar is somewhat insulated from subsidy cuts, think Heller & Co., because its superior cost structure “is at least 2 years ahead of the competition,” including Applied Materials (AMAT) and German manufacturer Q-Cells [QCE.DE]. Heller & Co. now think FSLR should trade at a multiple of 50x 2009’s projected earnings, down from a multiple of 55x the analysts assigned back on May 12.
Nevertheless, the entire solar universe is feeling the, uh, heat, today. As of 1:30 p.m.:
First Solar is down over 6% at $256.51;
SunPower is down 6.7% at $77.42;
Evergreen Solar is down 7.5% at $10.42;
Suntech Power Holdings (STP) is down 6.27% at $41.59;
Cypress Semiconductor (CY), which has a large stake in SunPower, is trading down 4.5% at $26.76;
Applied Materials is actually up .7% at $19.67 (I guess it’s not really a solar stock yet);
Q-Cells is down almost 6% at 71.19;
Akeena Solar (AKNS) is down 5.7% at $6.57.
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This article has 23 comments:
These are the same co.s that bought into FICO scores and AAA rated tranches, etc. and created the whole subprimse mess.
They're running a racket and solar is like a foreign language to them as well as any kind of alternative to mainstream. They don't like reliance on subsidies, they don't understand the big picture on energy.
Solar is the future and both governments and free markets realize that. Will their be pullbacks on the way up? Of course. Some of those pullbacks will be induced by analysts who want to control these stocks like a yo-yo. That's their game.
No worries. There's more than a few people long on solar...there will be many sunny days ahead.
-scott
solarfeeds
Alcohol is for drinking not mixing with gasoline.
IMO
www.bloomberg.com/apps...
Solars appear to be rebounding in pre-market trading.
Gov. believes German solar sector can stand on its own feet in the future, with Q-cells diversifying into thin film and Upgraded Metallurgical Silicon (solar grade, with 15 % cell efficiency, from Timminco for Malaysian wafering site to compete with Chinese (CSIQ).
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