Analyst Continues to Cut Estimates on Solars (STP, FSLR, WFR)

November 12, 2008 12:31 PM EST

Hapoalim Securities, a noted solar bear, issued a research note yesterday lowering its estimates for several important solar metrics: global solar demand and global weighted average solar module prices. For 2009, the firm now sees global solar demand of 4.9GW, down from its previous estimate of 6.4GW, and global solar module prices down from $3.28/watt to $2.99/watt. For 2010, Hapoalim now sees global solar demand of 6.7GW, down from 9.6GW.

The firm cites solar consumption, ahead of a "looming global recession" which is "heavily weighted to the residential & retail segments..." as its top reason for the estimate reductions. Considering that banks in Germany, Italy, and France (3 top promoters of solar power) have recently cut lending for incremental solar projects targeted for next year, Hapoalim believes that earnings estimates at many solar companies still need to come down further. Additionally, the firm expects module manufacturers to reduce prices moving into next year given 1. "the precipitous fall in the value of the Euro... of which 80%-90% of all solar modules are denominated" and 2. "a 150-200bps increase, among European banks, in the cost of lending, effectively reducing project IRRs..."

As a result, Hapoalim has cut its EPS estimates on Suntech (NYSE: STP), First Solar (Nasdaq: FSLR), and MEMC Electronic Materials (NYSE: WFR):

• Suntech - CY08 from $2.00 to $1.17, CY09 from $1.64 to $1.49
  
• First Solar - maintains CY08 estimate of $3.91, CY09 from $6.97 to $6.32
  
• MEMC Electronic Materials - CY08 from $3.55 to $3.51, CY09 from $3.78 to $3.65

The firm maintained its Sell ratings on Suntech and First Solar and Hold rating on MEMC. Further, Hapoalim cut its price target on Suntech from $16 to $12, but maintained a $90 price target on First Solar and $17 target on MEMC.

Today, with the broader markets down about 3%, on average, and crude oil down more than 4%, solar stocks are nose-diving. Shares of Suntech are currently down 16.7% to $10.56, shares of First Solar are down 11.5% to $115.84, and shares of MEMC are down 9% to $15.20. Based on these levels, Hapoalim's price targets suggest upside of about 13% for Suntech's stock price, about 11% for MEMC, and downside of about 22% for shares of First Solar.

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