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Solar Rally — How Long This Time?

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For the past few months, stocks of solar-energy companies have been following the movements of the broader market, only with amplified volatility. So it comes as no surprise that, with stock indexes in general rising for the fourth straight trading day, solar stocks are up big.

In mid-day trading, Solarfun is up 21 percent at $5.01, Trina Solar is 16 percent higher at $8.85. SunPower is trading up 11 percent at $33.79, Evergreen Solar is up 17 percent at $2.79 and bellwether First Solar had risen 6 percent to $124.76.

What’s going on? Adding to a sense that the heavy, across-the-board selling had eased up and offered investors a chance to buy stocks at beaten-down prices was an encouraging earnings report from Yingli Green Energy, one of the biggest solar stars back in the halcyon days of 2007.

While Yingli reported a 16 percent drop in its third-quarter profit (tied to currency losses and higher operating costs), it held onto its estimate of revenue this year between $1.05 billion and $1.11 billion. The higher figure would represent a doubling of revenue this year.

Yingli also announced that it’s buying Cyber Power, a China-based company with a subsidiary producing polysilicon, for a price between $70 million and $80 million. Overall, the company said things aren’t getting worse than it had previously thought, and these days that’s what passes for good news.

Yingli was up 4 percent at $4.67 during trading Wednesday. Since last Thursday’s close, the stock has risen 82 percent. Other stocks have seen similar surges — SunPower is up 64 percent this week, helped in good part by a research note from Raymond James, which argued its strong execution warrants a “strong buy” rating.

“SunPower’s track record for successfully developing and executing some of the world’s largest photovoltaic projects gives it a major edge when competing for utility contracts.”

Despite the challenges facing the solar industry, the Raymond James analyst, Pavel Molchanov, found reason for optimism in the sector.

“We take this opportunity to highlight a bright spot against the tough backdrop: one of the more durable sources of photovoltaic demand — the U.S. utility market.”

As encouraging as that sounds longer term, it’s likely the broad selling pressure will resume in early December (a big month for hedge fund redemptions and tax-related selling), which could erase many of the big gains achieved this week.

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