The solar technology industry may report a stronger-than-expected third quarter but could face disappointment in subsequent quarters, warns Hapoalim Securities analyst Gordon Johnson in a note to clients today. Johnson says that his checks suggest demand for photovoltaic modules in Germany has been better than expected, raising the prospect that solar tech makers could demonstrate better sales growth and margins than expiated when they report the September quarter.
The longer term quality of the industry’s growth may be questionable, however. When growth slows for industries, notes Johnson, the participants often resort to what he calls financial chicanery to hide the slowdown, and that’s what he expects from solar tech companies.
Among the trends that Johnson cites is questions revenue trends, as when companies’ cash flow from operations is less than net income for multiple quarters. He notes this is the case for First Solar (FSLR), which has reported smaller cash flow from operations compared to net income for the last two quarters after cash flow exceeding net income prior to that. Suntech Power Holdings (STP), similarly, has generated less cash from operations than net income for 11 of the last 12 quarters. Both may be guilty of “aggressive revenue recognition,” Johnson warns. SunPower’s (SPWRA) cash flow has been $7 million less than net income, on average, since the company’s inception, which is below the group average of cash flow $5 million above net income....MORE
Monday, October 5, 2009
Report: Solar Stocks’ Aggressive Accounting Raises Red Flags (FSLR; SPWRA; STP)
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