Extended Tax Credits Should Cause Solar Stocks to Heat Up

After the Senate finished grilling the Wall Street bailout triumvirate of Bernanke, Paulson, and Cox, it got to work passing HR 6049, the Renewable Energy and Job Creation Act of 2008, aka the Investment Tax Credit [ITC]. This bill has churned endlessly in Congress this year, but the Senate's approval has made final passage by the House and the President almost certain.

Given the renewed selling in solar stocks to start this week, it seems investors and traders were losing hope that this bill could pass because of the enormous financial obligations the American people are likely to take on to save Wall Street from itself. In particular, Energy Conversion Devices (ENER) was slammed for a 19% loss on Tuesday after its major customer, Solar Integrated Technologies [SIT: London], "cut its 2008 revenue outlook, saying its U.S. market was being 'adversely impacted' by the pending expiry of the Investment Tax Credit and tightening credit markets."

These are two risk factors that I and others have mentioned in earlier pieces describing the risks inherent in investing in solar stocks, but this is the first time I have noticed a solar-related company directly mention the credit markets as a source of trouble for its own financial performance. Now that the U.S. will most likely extend tax credits to solar companies, it seems that Solar Integrated Technologies' warning may be a bit premature, and the resulting sell-off in ENER a bit overdone...

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Comments

[Road Runner:]

I agree. The combo of finally passing the solar tax credit bill and bailing out the financial markets is very good for the solar companies.

2008 Sep 24 02:00 PM