January 15, 2010 – Analyst Comments – Cowen’s Rob Stone weighed in this morning on the solar sector, commenting that he thinks solar stocks are oversold on concerns about the impact of reductions to the German feed-in-tariff regime. He reiterated his OUTPERFORM rating on First Solar (Nasdaq:FSLR), SunPower (Nasdaq:SPWRA) and Trina Solar (NYSE:TSL).
Stone’s Key Takeaways:
· An adjustment of 15% (on top of the 9-11% degression already in the EEG for 2010) is most likely, and would still result in adequate IRRs and continued German market growth.
· The potential that cuts would be implemented by April 1, 2010 is sooner than expected (July 1 was seen as most likely before), but it is not clear that this can be accomplished, since the EEG must be formally amended (requiring votes in both houses of the German parliament), followed by an adequate notice period to the market. Importantly, there is no talk of a cap, and Stone believes the government wants to ensure continued growth in solar installations.
· The importance of jobs in the solar industry when German GDP declined 5% in 2009 should not be overlooked.
A definitive proposal could come from the Environment Ministry early next week, which would likely reduce uncertainty and lift the stocks.
