Solar stocks burned bright Tuesday after a double dose of good news from some key industry names boosted the long-term bull case for the sector.
Although it’s been a disappointing year for many momentum plays, that sluggishness hasn’t extend to solar stocks. Indeed, the Guggenheim Solar ETF (TAN) is up 25% for the year-to-date, while the Market Vectors Solar Energy ETF (KWT) has gained 19%.
You can thanks news like Tuesday’s updates from Yingli Green Energy (YGE) and SolarCity (SCTY) for fueling the market-crushing returns from solar stocks.
YGE stock jumped as much as 12% at one point in early trades after Yingl posted a narrower quarterly loss, helped by rising prices for its solar panels. SCTY stock also rose as much as 12% early in the session after SolarCity delivered two pieces of catalytic news.
In the first punch, SCTY said it struck a deal to buy solar tech company Silevo. SCTY — which makes and installs solar panels — wants Silevo, a maker of high-efficiency solar modules, because the combination of their technologies and scale could help it create a breakthrough in lowering the cost of solar power — something that would give all solar stocks a lift.
In the second punch, SCTY also said it’s in talks with New York state to build one of the largest single-solar panel production plants in the world. The proposed plant would have a capacity of more than 1 gigawatt within two years.
Solar Stocks: Finally Delivering on Promise
The latest news out of YGE and SCTY helps confirm that solar stocks are for real after years of fits and starts.
As for Yingli, YGE stock seems to have bottomed after having a terrible start to 2014. True, YGE is still down more than 20% on the year, but that’s up from a year-to-date loss of 45% as recently as a month ago. If nothing else, the latest YGE earnings news helps confirm that YGE is on track for profitability.
For the most recent quarter, YGE nearly halved its loss thanks to rising prices for solar panels, and much lower costs. YGE booked a net loss of $55 million, or 35 cents per American Depositary Share (ADS), vs. a loss $98.5 million, or 63 cents per ADS, in last year’s fiscal first quarter.
That improvement came despite revenue staying flat at $432.2 million. Higher selling prices and lower costs allowed gross margin to balloon to 16% from 4.1% a year ago — and that made all the difference for this microcap among solar stocks.
As for SolarCity stock, SCTY is up a market-beating 17% for the year-to-date. If SCTY keeps delivering this kind of news flow, shares have nowhere to go but up. Since SCTY has made no secret of its desire to make more acquisitions, it’s a safe bet that more catalysts for SolarCity stock are on the horizon.
However, as excited as the market was over SCTY and YGE Tuesday, betting on individual solar stocks remains risky despite the industry’s bright future. If you’re bullish on solar stocks — and there’s good reason to be — ETFs like TAN and KWT are still the wisest ways to get in on the action.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
