Tuesday, October 7, 2008

In This Earnings Season, the Guidance Will Be Deadly

The whole thing is worth a read, I'm snipping the solar bits. From Barron's Technology Trader (Oct. 6):
...THE SOLAR SECTOR IN RECENT WEEKS has been zeroed in like a laser on the prospects for congressional passage of an extension of the solar investment tax credit. The measure was originally part of a "tax-extender" package approved in different forms by the House and Senate, then lumped into the bank-bailout bill which passed on Friday. The current credit expires at the end of 2008, and the Street had worried that failure to extend might halt new solar-project construction in the U.S.

But by the end of last week, the beleaguered solar stocks had become haunted by a couple of new issues that an extension of the ITC won't cure.

For one thing, as analyst Jonathan Hoopes of ThinkPanmure notes in a research report, "if economic growth slows, demand for new energy generation will likely slow as well," reducing the urgency of developing alternative energy sources. And slower growth likely means lower commodity prices, including for coal and natural gas, making it tougher for alternative-energy projects to compete with conventional-power generation.

It's also now dawning on solar players that large-scale alternative-energy projects require a generous supply of capital. And this would not be an ideal time to be hitting up the capital markets for big piles of cash. "While it is still early days for the solar industry," Hoopes writes, "we cannot help but think that there will more than a few who get crunched in the current credit crisis."...