Sundown for Solar Stocks LDK, FSLR, ESLR, SPWRA, STP, TSL, KWT?

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On Tuesday, one of the solar sector’s brightest companies failed to shine.  China-based LDK Solar (LDK) reported a narrowed loss in its fourth quarter of $7.3 million, or 7 cents per share, on a 29% decline in revenue to $304.6 million. Unfortunately for LDK and the rest of the solar sector, the loss fell well short of Wall Street forecasts for a profit of 12 cents per share.  As you might expect, LDK’s earnings miss sent the stock down substantially in Tuesday trade. The LDK miss can be viewed as a barometer for trouble ahead in the solar space — a sector already under pressure from analysts and price metrics in the PV space.

A negative call by Barclays Capital analyst Vishal Shah back in February helped send shares of the highest profile stocks in the sector reeling, including Evergreen Solar (ESLR), First Solar (FSLR), SunPower Corp. (SPWRA), Suntech Power Holdings (STP) and Trina Solar (TSL).  Shares of the Market Vectors Solar Energy ETF (KWT), a fund that tracks the solar sector, also fell sharply in February. In fact, year to date KWT shares are down more than 16%, compared to a gain of nearly 5.3% year to date for the S&P 500.

In that February research note to clients, Shah warned investors that future growth could turn out to be disappointing relative to expectations.  “Given the lack of meaningful sustainable demand beyond 2010, intensifying currency headwinds and prospects of declining sector profitability, we expect solar shares to remain under pressure until demand from either the U.S. or China becomes more certain.”

That’s certainly not a bullish prognosis for the sector, or the stocks in the solar space.  So, is this the beginning of sundown for solar stocks? Maybe not.

Interestingly, a little more than a month after Shah issued his solar warning the Barclays Capital analyst came out and said that news on the policy front concerning future cuts in solar subsidies from both Germany and Italy, along with the prospects for better-than-expected third quarter earnings results in the sector, is actually increasing.

On Monday, Shah raised his rating on Solarfun Power Holdings (SOLF) to “Equal Weight” from “Underweight.”  He also raised his price target on First Solar to $125 from $100 and on Trina Solar to $25 from $23.  Shah also raised price targets on Canadian Solar (CSIQ) to $25 from $21, on ReneSola (SOL) to $7 from $5 and on Yingli Green Energy (YGE) to $7 from $5.

As you can see, even a top analyst has conflicting views about the future of solar stocks, so it’s no surprise that the average investor also should feel a bit of trepidation before soaking up the sun.  That being said, solar stocks have proven to be big winners in the past for alternative energy investors.  If the metrics in the space improve, getting in on solar stocks after their recent sell off may indeed prove to be a shiny portfolio proposition.


Article printed from InvestorPlace Media, https://investorplace.com/2010/03/solar-stocks-ldk-eslr-fslr-spwra-stp-tsl-kwt-solf-csiq-sol-yge/.

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