Notorious Solar Bear Says Solar Co's. Still Too Optimistic (FSLR, STP, SPWRA, more)

December 11, 2008 2:56 PM EST

An analyst from Hapoalim Securities is out with a research note today reiterating his thesis that solar companies are still being too optimistic, even in light of the recent negative pre-announcements at Q-Cells and JA Solar (Nasdaq: JASO). The analyst said he is seeing "a major disconnect between CY09 solar supply and solar demand" and sees further downside to Q4 revisions at many solar companies.

The firm's analyst points out that, even when taking into account the recent reductions to solar shipments around the globe, "solar cell/module makers are still guiding shipment growth of 91% in CY09." Hapoalim notes it is currently estimating a 2.5% decline in market demand, while the Street is currently estimating growth of 20-30%. Keeping this in mind, the firm does not see solar stocks finding a bottom "until forward numbers are fully adjusted to reflect the glut of supply that will emerge over the next 3-to-6 months." The firm maintains its Market Underperform rating on the solar sector and Sell ratings on First Solar (Nasdaq: FSLR), Suntech (NYSE: STP) and MEMC Electronic Materials (NYSE: WFR).

Further, the firm believes that in order for global solar consumption to meet Street estimates (assuming consumption of 1.2GW in Spain and demand below the upper-end of Germany's growth corridor of 1.5GW), "non-Germany/Spain regions" would need to consume about 5.9GW of solar supply in CY09. Given the current concerns related to the solar market -- the credit crisis, a global recession, and pending reduction in consumption in Spain -- the analyst believes that the likelihood of this is less than 1%.

Hapoalim believes that solar companies, such as First Solar and Sunpower (Nasdaq: SPWRA), are still being so optimistic due to:

• an assumption that the U.S. will bail-out the solar industry in CY09
  
• the view, among companies, that they are/will gain share from faltering peers
  
• the view/hope that favorable incentives will be created in new solar markets in CY09, thus driving demand, and
  
• its belief that many industry participants do not want to acknowledge that there is a limit to what can be sold (for the first time in over 2 years).

The firm believes that any solar company projecting CY09 shipment growth in excess of 2x consensus demand growth (20%-30%) is at "the highest risk of downward earnings revisions." The company specifically mentions First Solar, Canadian Solar (Nasdaq: CSIQ), Yingli (NYSE: YGE), Sunpower and Trina Solar (NYSE: TSL).

Shares of First Solar are currently up 0.7% to $120.22, shares of SunPower are down 0.9% to $31.71, and Suntech stock is down 4% to $8.96, just to name a few.

Related Categories

Analyst Comments
Insiders' Blog

Stocks Mentioned

Comments

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?