Solar Slowdown: Beware Investing in Solar Stocks
James | Jul 14, 2009 | Comments 19
Those of you jumping into hot Solar stocks should hold back now as they are starting to cool down now that the solar power industry is about to deliver some bad, bad news. Yes bad news as today, analysts reported that the leading solar companies might miss expectations when they announce earnings and could very well lower their forecast and expectations for the rest of the year. This makes investing in Solar stocks not as attractive as it once was. Adding to the disappointment for the sector is the rapidly falling prices of the photovoltaic systems. With so much competition among the sector now, prices are being forced lower and amid the recession many companies are finding problems in financing new projects. A huge side affect harming the solar industry is the fact that many buyers are putting off their purchases hoping they can get a better deal down the road. Solar has become a commoditized business in which every company delivers the same product. Ultimately consumers pay per watt for solar power. With the downfalls of the recession and big corporate cuts of technology, analysts predict prices to fall from $2.50 to $2.00 per watt and falling to around $1.85 per watt in 2010. That alone will force many solar companies to lower their forecasts. With many large corporations such as First Solar (FSLR) expected to miss expectations they will most likely have to write off millions in inventories as well this fall as their value depreciates. As a result, I am becoming very bearish at least short-term on all solar stocks such as SunPower (SPWR) whose sales have dropped 50% so far this year and due to falling prices the company will most likely cut back prices from the premium numbers they currently charge. This all will spill down the line leaning towards bad news for Evergreen Solar (ESLR) and Suntech Power (STP). The only bright spot for the Solar sector would be the American Recovery and Reinvestment Act, which Barack Obama signed into a law in February. This bill will include grants for renewable energy projects, mainly solar, and helps reimburse buyers of solar energy up to 30%. The government plans to disburse around $3 billion to the sector. Plus with rising oil costs and crude expected to soar over $100 in the upcoming years, more people might turn to the clean energy. Overall though, my fundamental outlook for the next year for Solar Energy is Neutral yet leaning to the side of negative. Long-term solar will appreciate as the companies are aggressive in pursuing new product introduction and foreign expansion which has been really successful especially in China. In this solar downfall though I think the sector will see an up-haul and re-shift with many of the smaller companies merging with the large corporations in order to survive. Ultimately if you are looking to trade or invest in stocks within the next year, void Solar.
Most Commented Posts
Filed Under: Commodities/Energy • Featured
James (95)
Tim Zander (25)
Alex (24)
thevoice@voicedup.com (13)
Don E. Chute (10)
John@Family, Fitness a... (8)
Marg (7)
Phil-Am OSI (6)
Frank Server (5)
Mao (5)
What a difference a week makes.
STP now up 40% in just over a week.
The bigger picture is don’t bet against China
Sure did jump. I made some strong bets investing within YGE which has appreciated quite a bit. China and Solar are always wild rides.
James, I had a short on fslr from 250 until it hit 200, what are you’re thought on purchasing puts at the current price?
Think they would be a pretty strong investment as in the short-term this stock will struggle.
Thanks for keeping us up to date on the energy crisis. I too am long oil.
Will right an article on how to invest in new forms of energy soon whatever you think they might be. Still think we have another couple bullish years of Crude Oil and Natural Gas which I am sure you can tell by my article that I am still Bullish on Oil.
That is very bad news since Solar energy is the energy of the Future and it is also green energy, a non polluting energy. This price and demand fall will definitely slow down the developing of this sector.
Long-term I still think it will be fine just it will have its struggles in the next year, I am not sure it can be our energy of the future, I think we need to implement a combination of resources from Solar, Wind, Water, and my favorite Nuclear.
Solar, wind, water and Nuclear these are up growing sector of power. Future power will be depends on these sectors. Invest in these for long time.
As a newbie i am looking for these kind of info. This site is very interesting and informative for stock market viewer.
Hi James
I still hold a position in Suntech, STP, but consider it a speculative long term play. As they are the lowest cost producer they are most likely to survive.
I prefer wind and Vestas and GE are two plays there. BYD, the Chinese company BRK invested in is interesting, but man oh man the price is way too rich for me now. It’s closing in on a five bagger for BRK is less than a year!
Cheers
Dean
Further discuss this topic at http://www.randomchatter.org/stocksonwallstreet-net/1286-solar-slowdown-beware-investing-solar-stocks.html#post6110
James thanks for link. I am checking it out.
I have always wondered if solar would be a good market to get in, but it seems they have always had a hard time producing something that makes people want it bad.
With the dropping prices, it might make it a good time for a new solar company to enter, to produce products that pay for themselves in a year or less, making them a no brainer for anyone who buys power.
It would be a great deal if we invest in solar power market. Invest in this sector for long term. It will refund great profit.
Is anyone currently invested in Solar?
Don’t have any idea about this.
Very much so. I agree and disagree with your stance on FSLR. I agree that it is still overpriced versus it’s peers, but I would still not short it. As for the Chinese solars, I think they are a strong long-term investment. I think the sector will still struggle a bit in the short term, but I doubt any of the top-tier Chinese solars (w/ American ADRs) will HAVE TO merge or die. China is conservative, healthy, and growing. It has decided that it wants to green-up and it is proceeding with that plan on a grand scale. Costs are coming down fast, but there are financing accessibility boosts in the pipeline in the US and our economy is starting to adapt to the expectation (and legal quotas) that require more renewable sources of energy.
Sounds like we agree and disagree, I too believe that Solar long-term is a strong play especially in emerging markets such as China. However for the rest of 2009 and start of 2010 I do not like it for the various concerns I listed above. China is both trying to promote the green revolution yet they also are building many new coal plants so who knows what direction they are taking. Overall though long-term Solar and China are strong plays.