Home > Oil and Energy > The Death of Solar? Yet another bubble has popped!
 |  Add to Technorati Favorites| Follow Us on Twitter! Follow us on Twitter

The Death of Solar? Yet another bubble has popped!

Today's Financial News - Posted October 7, 2008

SunPower Corporation (SPWRA), First Solar, Inc. (FSLR), Yingli Green Energy (YGE) are getting hammered. It’s time to close the book on solar stocks for the next two years!

by J. Christoph Amberger

Baltimore — (TFN): Goldman Sachs just cut its Solar Stock Benchmarks for FSLR, SPWRA, CSIQ, LDK from a “Buy” to a “Sell”.

Two key solar stocks are being hit hard in early indications. First Solar, Inc. (NASDAQ: FSLR) had already cut its 52-week high of $317.00 by more than half. Trading below $140 today (down 10%-plus), it’s still twenty bucks above its 52-week low of $124.96.

SunPower Corporation (NASDAQ: SPWRA), too, has been decimated. (In fact, “decimated” — meaning a violent elimination of a tenth! — seems too tame a term to describe what’s happened!) The stock is worth just a third of its 52-week high of $164.49, trading just above its 52-week low of $52 right now.

My own recent recommendation of Yingli Green Energy (NYSE:YGE) is down to $7.59 (-10.50% just today) for a total loss of -55.58%.

I do not believe the stock will double any time soon for us to break even on it. Goldman Sachs’ change of direction tell me we’re in for a sea change in the attitude toward solar companies in general, beyond the upheaval in the current market.

My original call on Yingli — which we had covered since its IPO back in the Taipan days — was motivated by expectations that Obama will win the election, unleashing a tidal flow of speculative money into “politically correct” investments. A flow triggered by the expectations of a Federal gravy train of subsidies that could make up for the economic shortcomings of solar energy.

That money may still be coming. But overall, I believe recent fascination with solar is a Prosperity Phenomenon. It’s the equivalent of a Levenger catalog (”Tools for Serious Readers”) or an Eagle Scout project marking storm drains in prosperous suburban neighborhoods with “Don’t Dump” stencils. (I did that last Saturday!)

Large-scale adoption of solar technology by consumers represents a huge investment. And currently, it doesn’t look like there will be excess play money lying around anywhere… or credit being extended.

Plus, there’s talk of a huge solar over-supply by 2010.

My recommendation: Solar technology is the new bio-ethanol. Sell while you still get money for your shares.

I urge you to sign up to our free email letter — you can do so right here…

to receive our free TFN eNews.


Next Article: Has Aracruz Celulose (ARA) found a bottom?

Related Articles

 |   | Add to Technorati Favorites | Follow Us on Twitter!

Posted by J. Christoph Amberger · Filed Under Oil and Energy 

4 Responses to “The Death of Solar? Yet another bubble has popped!”

  • Mike Morris Says:
    October 16th, 2008 at 7:18 pm

    The most stupid article i have read. Solar is here to stay and will become a trillion dollar industry by 2025. China,USA, India and middle east will the markets after the European countries.
    The writer never had been to a science class I guess. Ethanol is a developed from commodity, Solar from SUN which will rise over stupid and wise people. Time will tell who this stupid people are.
    All Solar stocks will double by JAN from the lows and the same stupid analyst will come and upgrade the stocks.There is no industry which is as profitable as SOLAR. Mark my words.

  • Lee Says:
    October 7th, 2008 at 5:43 pm

    There are many solar stocks that should be avoided and this sector is complicated enough that it's difficult to tell good from bad. Most of the analysts don't seem to have a clue. That being said, it's hard to believe the territory these stocks have gotten down to over 2008. STP is trading at a P/E of 19 and their F/P/E is down to about 12.

    Spain had an amazing run of installations in August/September so third quarter earnings should be strong for STP and FSLR among others. But what about 2009? Over the last few years the integrators have developed some serious skills in Spain and Germany so as the Spanish market draws back the competition between the integrators is going to pick up. The profit margin at the integration end is high so there's plenty of room to drive prices down. The ramp in silicon production, coupled with wafering and BOS improvements will also tend to drive PV prices down. Japan, Italy, Hawaii and California aren't so far away from competitive markets. Japanese consumers at least still have some savings left…

    I can see how you'd compare solar to ethanol from a stock market perspective but not from a technology perspective. Ethanol yields are not going to double any time soon but PV can easily see a 50% improvement in prices within a few years.

    But yeah… The bubble is gone… Somebody aught to write a song…

    The bubble is gone…
    The trubble is on…
    I done and got conned
    So I'm writtin' this song

  • Joe Says:
    October 7th, 2008 at 5:42 pm

    How about some facts, not crap commentary? All this, just because first year Goldman analyst cut from hold to sell? How about forming your own opinions from the quantitative data presented? And just what do you mean by “Plus, there's talk of a huge-over supply by 2010.” Who's talking about it? I've been in energy for nearly a decade now, and I've been watching solar for a few years and now is the time to buy as new and more efficient (in terms of energy conversion ratio) solar cell technology starts hitting the markets.

    Furthermore, let's look at this: “Large-scale adoption of solar technology by consumers represents a huge investment. And currently, it doesn’t look like there will be excess play money lying around anywhere… or credit being extended. Plus, there’s talk of a huge solar over-supply by 2010.”

    So there's going to be a huge over-supply, but no large-scale adoption of the technology? Ok, that'll put the least-efficient bubble stocks under, paving the way for the companies that have strong fundamentals and better technology, and will give them a larger share of earnings, thereby driving up stock price. Remember a little thing called the tech bubble? Apple, Google, HP were all born or remade after that bubble, and look at what happened: market leaders for the past few years (and still are).

  • bob Says:
    October 7th, 2008 at 3:04 pm

    Lots of solar companies have already sold 2008 and 2009 production, guarnateeing their revenue estimates (excluding currency fluctuations). In fact, they're quite well off in terms of weathering the next 16 months.

Your comments are welcome