Solar Stocks: Debating China’s Subsidy Program

Barron's Eric Savitz has been all over the pop in the solar sector. Yesterday we linked to "Chinese Solar Stocks Rocket Higher On Stimulus Hopes". He followed up with "Update: Solar Stocks Rally On China Subsidy Plan" and this morning with the headline post:

So, care to guess the direction of solar stocks in Friday’s session? The stocks had a huge run on Thursday after China unveiled a program to subdize certain solar installations by 20 RMB/watt, or just under $3 a watt. The China-based solar stocks in particular had aammoth rally, with a few stocks up more than 40%. While the program is clearly intriguing, and has the potential to accelerate solar adoption in China, there are so far few details available on just how big the program will be, and whether there will be a cap on how much the country is willing to spend. There also seems to be some debate about what type of installations will be eligible for the subsidy; what is clear is that it is targeted at commercial installations of at least 50 KW, but not residential or utility projects.

The Street’s reaction to the news is decidedly mixed. While the broad outlines are promising, the lack of details leaves some observers cautious. And the huge move on Thursday makes some think the stocks have over-reacted. Here’s a quick rundown on some of the early commentary on the situation:

• Deutsche Bank’s Steve O’Rourke asserts that the stocks have over-reacted to the news, and says his near-term outlook for the industry remains “negatively biased as credit issues drive prices down and inventories up.” He adds that on the China subsidy, “the devil is in the details, and we await them.”>>>Six more analysts weigh in.