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Where's the Solar Stock Rally?

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Solarfun Power Holdings (SOLF) said Tuesday that it signed a long-term supply deal with Jiangsu Zhongneng Polysilicon. It also said it bought out Jiangsu Yangguang Solar.

So overall, two pretty positive business deals for Solarfun. And how did the stock react? It fell nearly 8 percent.

Wading into the solar sector is like dating a manic-depressive. Day-to-day events matter less than the prevailing, protean mood. And these days the mood among solar investors is dark, indeed.

Shares of all the major solar cell and panel makers closed lower Tuesday: Solarfun, Sunpower (SPWR), Suntech (STP), Yingli Green Energy (YGE), Trina (TSL) and JA Solar (JASO) saw declines of between 6 percent and 8 percent. And with the exception of First Solar, stocks are significantly down from their 200-day moving averages as well: Shares of Hoku (HOKU), for example, are down 45 percent from their trading average, Yingli is off 35 percent and Suntech is down 30 percent.

solar stocks, first half of 2008

What’s going on? For one, there are reports that Spain is considering cutting the subsidies for solar installations by 35 percent. Many of the companies whose stocks are tumbling today have a higher exposure to Spain than First Solar or Evergreen.

Many of them are also based in China, and there are concerns emerging about Chinese stocks in general, which have been tumbling of late, as well as cash flows and debt financing at many Chinese solar companies.

In a research note Tuesday, American Technology analyst John Hardy said he’s “concerned about SOLF’s reliance on high interest rate, short-term Chinese bank debt” needed to buy polysilicon. China’s heated economy is at risk of inflation, which could drive interest payments at Solarfun and other companies even higher.

It’s a little ironic that one of the few growing, investible alternatives to petroleum is in a stock slump just as oil prices continue to climb. Such are the interesting times — and, for now at least, times that are short on capital gains — that we live in.

10 Responses to “Where's the Solar Stock Rally?”

  1. global warming is real and solar is a solution to this problem as a group it is the most promising investment in the stock market. the overall market looks horrible. but solar investments should shine especially if obama wins. i cant help but think the market is predicting that the republicans will steal the election again keeping the oil industry and their congressman in charge of our nations energy policy. john mccain equal nuclear and offshore drilling. solar is a real solution but it threatens oil and utility companies.

  2. Ben Annand

    Okay, but if you look at the earnings reports of all the major solar companies it’s hard to justify that any are struggling to survive. Most have 10-25 percent profit margin. Spain’s subsidy cuts are killing the valuation right now, as did rumors of Germany’s before. However, those are only two countries in a global economy that NEEDS solar power, wind power, and other alternative power sources. The market is really volatile and can be very depressing for a solar stock owner, but I think right now you just have to be long on solar and not get caught up in the current downward trend too much. Use it as a buying opportunity before the next set of earnings reports when people remember that these companies are profitable and usually exceed earnings estimates. Not for the weak-stomached, but I expect the solar market to grow a lot regardless of what analysts have to say about it…

  3. There are a few major issues contributing to the decline in the solar power sector.

    1. Besides Spain reducing their subsidies, the US federal tax credit for solar power installations is expiring the end of this year.

    2. The stock market in general is getting battered right now, the global economic outlook is not so optimistic.

    3. Silicon supplies are limited at this point of time, until 2009 when according to research, silicon supplies will catch up with demand.

    The media portrays the solar power industry as such a glamorous, profitable business, although most companies are fighting to stay alive until solar power hits mainstream, which I think is at least 5 years away.

  4. Micah

    I really do not understand the rationale behind the broad sell off in the solar market. The fundamentals are strong and the market for solar has never been better.

  5. Michael Morrison

    Could this have to do with the growing interest in, and market availability of, lower cost CIGS and CdTe thin films, rather than something fundamental about solar market generally?