Bad day for solar stocks: A taste of things to come?
Today's Financial News - Posted August 17, 2009
Solar stocks Suntech Power Holdings Co., Ltd. (NYSE:STP), Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE), Trina Solar Limited (NYSE:TSL), Evergreen Solar, Inc. (NASDAQ:ESLR), Energy Conversion Devices, Inc. (NASDAQ:ENER), First Solar, Inc. (NASDAQ:FSLR), Spire Corporation (NASDAQ:SPIR) are getting creamed today. But does today’s sell-off bode ill, especially for U.S manufacturers?
by J. Christoph Amberger
Baltimore, MD — TFN: According to the German news magazine Der Spiegel and the German-language edition of the Financial Times, the German solar industry is threatened by an unprecedented wave of bankruptcies.
And not for lack of government subsidies: The German Feds are providing juicy incentives for Germans to put solar panels on their red-tile roofs. They can even get paid for feeding their solar-generated electricity into to grid.
That’s good for operators of solar energy facilities. But the manufacturers of solar modules have yet to benefit. Industry leader Q-Cells is unable to turn a profit, racking up a $160 million loss.
Asian competitors, especially the Chinese, South Koreans and Indians, are undercutting the Germans at every step.
Within two years, China has carved itself a 30% share from the global solar panel cake.
It’s not just the cheaper labor. According to UBS, Chinese companies like Suntech Power Holdings Co., Ltd. (NYSE:STP), Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE), and Trina Solar Limited (NYSE:TSL) are now able to build manufacturing facilities that cost less than two thirds of what the same project would cost elsewhere. Plus, Bejing’s heavily subsidizing the industry… through loans, currency manipulation, special perks.
German manufacturers have two choices: Slide into irrelevance. Or move manufacturing capacities to Asia.
Looking at the margins and return on average assets, American-based solar companies aren’t quite feeling the love the green stock gurus lavished on them during the crude oil bubble.
Evergreen Solar, Inc. (NASDAQ:ESLR) just reported a net loss of $0.11 for the second quarter of 2009.
Spire Corporation (NASDAQ:SPIR) just reported a Q2 net loss of $0.55 per share.
Barron’s just tore into First Solar, Inc. (NASDAQ:FSLR) with doubts about the company’s cash flow outlook — despite of Q2 EPS of $2.11 per share.
Energy Conversion Devices, Inc. (NASDAQ:ENER) has not yet reported Q2 earnings, but with net income for the first nine months of fiscal 2009 at $0.66 per fully diluted share seems to be doing alright.
Given the example of the German solar panel manufacturers, I’d be surprised to see any U.S. solar company become an uncontested market leader in the next 18 months.
Check out how our TFN researchers feel about the solar industry:TFN Special Research Report: The Three Best Solar Companies to Buy Now!
Next Article: Three penny-stock winners in a losing market
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August 17th, 2009 at 12:31 pm
Actually, it was a bad day for all stocks. Most oil stocks got hit just as badly as solar, so why pick on solar?