Goldman Turns Cautious on Solar Sector 27 comments
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Solar stocks traded sharply lower Tuesday morning after Goldman Sachs analyst Michael Molnar declared he has become cautious on the solar group, “as less generous subsidies combined with a wave of supply pose a real risk.”
Molnar asserts in a research note that the risk of oversupply in the solar market “will soon become a reality as considerably less generous demand subsidies take hold just as a wave of supply and tight financing hit the market.” He thinks that “liberal subsidies of the past in markets like Germany and Spain are unlikely to be replicated in the future given fears of their ultimate cost in a bad world economy.”
As supply increases, he contends, prices will have to “adjust strongly downward to generate demand.” He thinks that trend will lead to below-consensus estimates for module manufacturers and compressed valuations for stocks in the sector.
Molnar Tuesday cut his rating on First Solar (FSLR) to a Conviction Sell from Buy, slashing his price target to $103 from $365. For SunPower (SPWR) he goes to Sell from Buy, with a target of $43, down from $100. He also cuts his target on Evergreen Solar (ESLR) to $4.50 from $10.50.
He sharply reduced estimates for the solar stocks. For FSLR, he now sees $3.62 next year, and $5.92 in 2010, down from $3,75 and $7.13. For SPWRA, he sees $1.22 and $2.47, down from $1.27 and $2.63. For Energy Conversion Devices (ENER), he goes to $1.64 and $2.92, down from $1.72 and $2.87.
Meanwhile, Wedbush Morgan’s Al Kaschalk Tuesday morning cut his own target prices on the solar stocks, asserting that “with negative macro economic conditions and concerns over availability of capital in the near term,” multiples are likely to remain compressed for now. He cut his target on FSLR to $225 from $350. For SPWRA, he goes to $100 from $125.
Piper Jaffray’s Jesse Pichel likewise cut his target prices and estimates on solar stocks today as well, asserting that checks with renewable energy project developers suggest “the cost of capital on renewable projects will likely increase despite potential Fed easing.” He says that “the problem is access to credit and not demand.” Pichel cut his target price on First Solar to $250, from $350, cutting his 2009 EPS estimate to $7.63 from $8.47.
Tuesday morning:
- First Solar was down $12.56, or 7.9%, to $147.15.
- Evergreen Solar was down 20 cents, or 4.3%, to $4.38.
- Energy Conversion Devices (ENER) was down $2.51, or 4.7%, to $51.52.
- SunPower was down $8.74, or 13.2%, to $57.60.
- JA Solar (JASO) was down 55 cents, or 6.2%, to $8.34.
- Solarfun (SOLF) was down 45 cents, or 5%, to $8.58.
- Canadian Solar (CSIQ) was down $1.13, or 7.5%, to $13.85.
- LDK Solar (LDK) was down 71 cents, or 2.9%, to $23.99.
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I think we'll see a lot more games from these guys in the future. They've got to make book and it won't happen with ibanking.
The fact is that they were embarassed with the huge differences between their target prices and the current ridiculous spot valuations.
These cowards used the fisrt arguments that sounded pessimistic enough to be credible in this bearish market in order to adjust their target prices closer to spot levels... What an intellectual dishonesty !!
Molnar Tuesday cut his rating on First Solar (FSLR) to a Conviction Sell from Buy, slashing his price target to $103 from $365.
quote/
Seriously, if Mister Molnar is just going to pull prices on the fly from his ass, then he can aswell make it a nice round number. 103$? Why not just a 100$? I'd like to see their calculations scheets that first turn ip with 365$ and a few month's later with 103$.
Anyway, if you listened to Molnar when FSLR was at 315$ not that long ago, then you'd be seriously screwed over with this new target. Maybe GS should start to predict the fluctuations months into the future, like FSLR will first go to 365$ and then to 103$ and then to 25.689$ and 24 cents and then back to 5$.
> jack
Hedge Fund redemptions are still ongoing. Mutual Fund redemptions are still ongoing. Mutual Funds especially rely on the ANALysis of those entities being booed for direction on what to buy/sell so they can have scapegoats after making the wrong decisions. Now that Solar is going the way of ethanol, all I see is sniveling. Take your cue from the activity in CLNE.
The Solar stocks are getting smashed, get over it.
The reality is that they have too many players, they spent their IPO or Contract money before it was even earned, elaborate expansion, etc. Where are they going to get financing from. WHY aren't the INSIDERS in these firms buying their own shares IF they are so cheap.
Trina Solar has a PE of 7, How much further down do the rest of these highly speculative investments have to go down before they have PEs that are similar.
I'll will not even bother to look closely at FSLR until it approaches $60.
I would hazard a guess that all of you hold these shares but none of you are willing to buy more. And if none of you are willing to buy more, Why are you still holding them?
Protect your holdings, buy insurance.
A few of the overpriced solar companies are going to struggle more in the future, but I'm a bit skeptical as to the bearish outlook presented by Goldman Sachs.
I've heard about a half-dozen comparisons to the Internet bubble in the last few weeks when there were very few commonalities. Ag stocks are not like Internet stocks. Solar stocks are not like Internet stocks. Precious metal stocks are not like Internet stocks. Commodities in general are a completely different beast than fly-by-night Internet companies.
The Biggest problem with the Solars is the groupings as reflected by ETFs and other Green Baskets and/or indexes.
The Basket includes both junk and Great, when sold, its sold as 100 shares of each within that basket. Thats primarily the reason that I learned the hard way to wait until the Junk gets really reamed before buying those that have great earnings like TSL.