Trina Solar today reported a third-quarter profit rise of 87 percent, but the results fell short of analysts expectations, sending its shares to close down nearly 24 percent. Yet even with the decline, Trina’s stock is up 84 percent since its December 2006 IPO.
Trina’s shortfall also pushed down the solar sector as a whole, which, as we’ve previously noted, has had a banner year. But trading around solar has been choppy lately, with key subsidies in question and quarterly results coming in all over the map.
Investors are also getting skittish about rising polysilicon costs, which drove Trina’s margins down to 20.6 percent from 26 percent. The litany of concerns noted by Banc of America analyst Eric Brown seem like problems endemic to any commodity business, where limited product differentiation means fierce competition and low margins.
Still, solar companies are up big this year because someone has to make the commodity parts for large-scale solar systems that are being installed now, not sometime down the road. It might not be a pretty business, but it will be a business.
Fierce competition plus a maturing, more stable marketplace means one thing: consolidation. It seems like only a matter of time before SunPower (SPWR), Suntech Power (STP), First Solar (FSLR) and Trina realize that one big solar module maker has a better shot at surviving the next decade of solar industry growth than a half-dozen companies fighting tooth and nail (like a couple of Democratic presidential contenders).