There were murmurs that Suntech Power’s earnings for its most recent quarter would disappoint on supply hiccups, and now it seems that was indeed the case.
Suntech Power’s shares are getting slammed this morning, reportedly the biggest loser on the NYSE. The stock fell as much as 24 percent from Tuesday’s close to $35 a share. Suntech has committed a big no-no for a solar-energy company – it missed earnings and lowered guidance on future earnings, undermining faith in its powers to grow indefinitely.
The Chinese-based solar panel maker blamed the disappointing quarter on rotten weather in its home market as well as the Chinese New Year holiday, a seasonal factor that seems a poor excuse considering that it didn’t hamper Suntech’s earnings much last year.
In the current quarter, Suntech says it’s expecting $375 million in revenue, well below the consensus figure of $455 million from analysts. Zhengrong Shi, Suntech’s Chairman and CEO, said in a statement that silicon costs should decline this year, offering a little breathing room should revenue stay weak.
“We successfully developed a strong silicon supply pipeline of 530MW for 2008. Suntech’s silicon outlook for 2009 is even more promising. Due to the silicon supply contracts we signed in the fourth quarter … our silicon costs will fall more than twice as fast as our projections of our average sales prices in 2009.”
This morning, that outlook seems too little too late. It seems Suntech’s near-term silicon supply faces a thornier choice – buy silicon from the costly spot market or scale back on silicon and suffer lower revenue. Given the uncertainty in the fast-changing solar-energy market, 2009 seems a long time to wait for better margins. But those with a longer view may see in today’s turmoil a way in to Suntech.