Solar stocks continue to have a rough time. In stark contrast to 2007, when the bigger names in the sector were rallying month after month on the promise of solar power, there is no clear sign of where the bottom is.
Just when it looks like old concerns have been priced into solar shares, a new glitch emerges to push them even lower. Positive earnings surprises or expectations of falling polysilicon prices will lift stocks for a bit, only to have new problems – cheaper oil curtailing demand for solar energy and tightened credit – drag them back down.
Take Suntech Power (STP), which started 2008 at $82 a share and then fell to $11.95 in late October, before bouncing back above $20 last week. But it soon tumbled back to $12 a share on a warning of a new threat – an unexpectedly resurgent dollar. Rival SunPower (SPWRA) said the strong dollar would hurt its earnings next year. The news pulled down the whole sector, including Suntech, which relies on a weak European market for sales.
Over the weekend, China announced a $560 billion domestic stimulus package, but as a post at Seeking Alpha noted, even that news was seen as a negative for solar stocks:
What disappointed investors is that the stimulus package does not mention any renewable energy policy, which was widely expected. Companies like Suntech Power, Yingli Green (YGE), JA Solar (JASO), Trina Solar (TSL), and LDK Solar (LDK) are largely expecting a domestic boost from the government while European demand is weakening, and the weakening Euro also cuts into profit margins of these companies.
Suntech fell 9 percent Monday; JA Solar fell 19 percent; Evergreen Solar fell 11 percent. Investors aren’t stepping in to shore up the falling socks when selling picks up – the proverbial falling knife no one wants to catch.
When will a bottom appear? It will require some encouraging news big enough to wash away the mounting pile of concerns. A stimulus package focused on solar power would be enough, but few seem willing to bet something like that is a certainty right now.