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Summary:

The mood in the solar stock sector today might best be described as dark green. Shares in Qidong, China-based Solarfun posted financial earnings that were ahead of analyst expectations, but the shares dived as much as 11 percent percent on concern that prices for its photovoltaic […]

The mood in the solar stock sector today might best be described as dark green. Shares in Qidong, China-based Solarfun posted financial earnings that were ahead of analyst expectations, but the shares dived as much as 11 percent percent on concern that prices for its photovoltaic cells and modules will decline as much as 10 percent next year.

That followed another earnings report Tuesday from Nasdaq newbie GT Solar, which saw revenue more than triple to $57 million in its most recent quarter. The report, its first following its high-profile but ultimately disappointing IPO last month, also showed GT swinging to a profit of $5.1 million, or 3 cents a share, vs. a year-ago loss of $5 million, or 4 cents a share.

Yet shares of Merrimack, N.H.-based GT, which makes equipment that solar-panel companies use in their facilities, fell more than 10 percent to change hands for as low as $12.61 on Wednesday morning — a 23.6 percent drop from its $16.50 offering price.

The renewed bearishness follows what last week had started to look like confidence returning to solar stocks. It seems past performance, however strong, isn’t outweighing lingering concerns about what lies ahead for solar companies.

Take Solarfun. In discussing its financial outlook, the company made statements that suggest silicon prices will remain high at least through the coming quarter, while average selling prices, or ASPs, for its own goods are poised to come down in 2009.

“Gross margins for the second half of 2008 are expected to improve from levels seen in the second quarter of 2008, although the Company expects that polysilicon and wafer pricing will continue to be high during the third quarter of 2008.”

“For the Full Year 2009, management expects … ASPs to decline 5-10% from the expected full-year 2008.”

Nevertheless, Solarfun also said it expects its gross margins to improve next year as it manages the squeeze. That wasn’t enough. The negative sentiment about the solar market seems to have won the day.

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By Kevin Kelleher
  1. maybe the “profit taking” downside has something to do with the fact the shares had bounce a enourmous 100% or $10 off an $11.00 low point 2 weeks ago.

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