The remarkable swoon of the solar sector continues unabated.
While there remains widespread anticipation that an Obama Administration will push for an expansion of the use of alternative energy generally and solar in particular, those hopes have been overwhelmed by collapsing fundamentals in the industry. Several companies this week - including Canadian Solar (CSIQ), Suntech (STP) and Trina Solar (TSL) provided distressing guidance for the fourth quarter. The industry is being plagued by a combination of slowing demand in Europe, tight credit, collapsing prices and the strengthening dollar. Will the world eventually adopt solar power as a major source of electricity? Indeed it might. But in the short-run, the focus on the Street is on mundane issues like the near-term trend in revenue, profits and margins. And the indications are not good.
A number of analysts weighed in this morning on the solar stocks; here’s a rundown:
- Oppenheimer’s Sam Dubinsky today cut his ratings on Suntech, Canadian Solar and JA Solar (JASO) to Perform from Outperform. While conceding that his rating changes are “late,” given the “considerable pessimism” already priced into the stocks, he adds that “fundamentals for the sector remain murky, given a volatile Euro, tight credit markets and sub-$50 oil.” He says the long-term prospects remain promising, but that “a quick recoveyr in 2009 is predcated on too many moving parts to warrant a positive near-term stance.”>>>MORE
I should post Trina's conference call transcript, there were some company specific positives that (re-) assured me that although the stock, like every one in the group, is priced for bankruptcy, this is one that will be around next year. We have looked under this hood before, from a Sept. 29 post, "Solar Stocks Clobbered; No ITC Extension Before Election":
One point that Mr. Savitz's interviewee doesn't mention is that among the Chinese solars are some that are not cash flow positive. Raising capital in this environment is going to be tough, a couple may become insolvent, be forced into an inopportune merger or have to scale back expansion plans. Trina won't be among the first or second groups* but may be in the third....