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A solar shakedown
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Solar: Google Images
As the market got crushed this week, the solar sector really took a beating.
On Wednesday, LDK Solar (NYSE:LDK) announced that its Q3 earnings beat expectations, and also offered a positive outlook. The result – the stock popped in premarket, then took a nose-dive, ending the day down 12.89%.
Essentially, analysts didn't buy the company's outlook given the current state of solar. And continued inhospitable market conditions just added fuel to that fire. Not to mention the continued panic about the state of Chinese solar companies.
A couple of weeks ago, Wedge MKI (the Asian segment of research group Wedge Partners), noted that China-based solar cell and module manufacturers are slowing production in anticipation of slowing demand and falling prices. Of course, I still believe many analysts are underestimating the U.S. market for solar. Especially now with the tax credit extension in place, and pro-solar President-elect Barack Obama getting ready to throw his weight behind the industry. But Wedge did list some key points of interest that lead to the uncertainty in Chinese solar companies. These include:
* Suntech Power (NYSE:STP) idling half its production lines and laying off about 10 percent of its workforce
* Trina Solar (NYSE:TSL) halting plans to expand to 700 MW through Q1
* JA Solar (NASDAQ:JASO) having to sell its large volumes of inventory at drastically-reduced prices
So by Thursday, when Suntech Power did announce earnings, we knew the beating would continue. STP, which is probably the most well-known Chinese solar player, fell nearly 40 percent after the company announced a weaker Q4 outlook. But what can you expect when LDK falls more than 12% after announcing a tripling of revenue?
So here we are at the end of the week, looking back at dozens of solar stocks that have lost in excess of 30% over the course of four or five days. For those who have been long since the market meltdown began, this doesn't paint a rosy picture. But for those looking for bargains in the solar space, well, there's plenty out there. Though given the continued skepticism towards Chinese solar manufacturers, Green Chip investors looking to pick up some solar bargains, might want to stick with those that aren't pumping PV out of Beijing.
At current levels, Evergreen Solar (NASDAQ:ESLR) and SunPower Corporation (NASDAQ:SPWRA) are probably your best bets for safety and a quicker turnaround.
Evergreen utilizes a manufacturing process that is superior to all others when it comes to minimizing silicon waste, and really just stretching those silicon supplies a lot further. Their process basically uses about five grams per watt of silicon, which is about half the industry average.
SunPower Corporation is one of the most stable suppliers in the U.S. And having interviewed dozens of installers, the SunPower panels seem to be the panels of choice. Their efficiencies are the highest in the marketplace. So basically you need less panels for a typical installation. This makes it easer on the installer, and in many cases, cheaper for the customer.
Of course, at the end of the day, overall market conditions dictate everything. So for those sniffing around these bargain bins...do so cautiously.
For the latest research on solar stocks, visit Green Chip Stocks.
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