Solar Stocks Continue Lower on Fears of Spain Subsidy Cuts (SWPR, FSLR, WFR, SOLF, more...)

July 2, 2008 3:07 PM EDT

Solar stocks are under heavy pressure for the second straight session on news Spain proposed a solar cap. The cap would limit solar projects that receive government subsidies to 300 megawatts next year, down from 400 megawatts this year. The proposal would also cut FITs 35% to EUR0.33 per kWh for rooftop installations and EUR 0.29 per kWh for ground installations.

Citigroup thinks the new proposal will see big opposition from top Spanish PV industry groups, but still sees a large year-over-year decline.

Citigroup thinks SunPower (Nasdaq: SPWR) is most exposed to lower Spanish subsidies, with 50% of their sales coming from Spain in Q1. They said they would get more bullish on SPWR in the $60 range (stock currently at $64). Citigroup said Spain is less important to First Solar (Nasdaq: FSLR), which remains their top pick in solar with a $450 price target.

Commenting on the proposal Deutsche Bank said, "Risk is clearly there, and we are not dismissing that risk, but we believe that the proposal terms being circulated are simply that - a proposal to be negotiated." Deutsche Bank is recommended solar stocks that have little exposure to Spain, like First Solar and MEMC Electronics (NYSE: WFR). They said MEMC play in a more insulated part of the food chain over the near term. They said while they are very positive on the long term prospects for companies like SunPower, exposure to Spain and the US will drive significant near term volatility.

Solar Stocks:
SunPower (Nasdaq: SPWR) down 4.35% to $63.75
First Solar (Nasdaq: FSLR) down 5.7% to $254.90
MEMC Electronic (NYSE: WFR) down 2.9% to $57.92
Solarfun Power Holdings Co. Ltd. (Nasdaq: SOLF) down 8.6% to $14.75
Evergreen Solar Inc. (Nasdaq: ESLR) down 4.5% to $9.04
Suntech Power Holdings Co. Ltd. (NYSE: STP) down 1.7% to $33.82
Trina Solar Ltd. (NYSE: TSL) down 0.9% to 29.02
Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) down 1.4% to $14.71
ReneSola Ltd. (NYSE: SOL) down 9.3% to $14.30
Canadian Solar Inc. (Nasdaq: CSIQ) down 6.6% to $33.97

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