On March 9 we noted his downgrade of the solar sector in "First Solar: Don't Try to Catch A Falling Knife; Downgrading Solar Stocks on Oversupply Risk - JP Morgan (FSLR: ENER)".
Here's the rest of the story, from TheStreet.com:
This is the first part of a two-part* interview with JPMorgan Chase alternative energy analyst Christopher Blansett. This week Blansett produced a report advising institutional investors to shy away from solar stocks and embrace wind energy stocks in the next two years. We sat down with Blansett to shed some light on JPMorgan's total eclipse of the sun.Why Wind Is A Better Buy Than Solar (Part 2)
The latest pessimistic outlook for solar investors was provided on Tuesday by JPMorgan Chase analyst Christopher Blansett. But Blansett went took his pessimistic outlook much further than most.
The JPMorgan analyst began his negative turn on solar by downgrading three of the U.S. solar stocks that he covers -- First Solar(FSLR), Evergreen Solar(ESLR) and Energy Conversion Devices(ENER). More notably, however, Blansett recommended to JPMorgan clients -- from hedge funds to pension funds -- that they forsake solar and focus their renewable-energy investing on the growth of the U.S. wind industry, at least for the next two years.
Blansett is far from alone in this position. Several solar analysts have noted in recent weeks that institutional investors seem to have tired of solar and have been looking for alternatives in the renewable sector to maintain their exposure. Blansett says that most institutional investors have decided that solar is a lot of work for little reward. Over time, as there are more wind-focused pure-play companies, institutional investors will look more toward wind and move away from early solar-centric investing.
JPMorgan initiated coverage of the U.S. wind sector on Tuesday, with an overweight rating for Broadwind Energy(BWEN). The analyst's bullish call on wind sent shares of Broadwind up by more than 6% on the day.
Solar companies have, of course, been using this earnings season as a pulpit to play up the first-half demand from Germany, and argue for the second half pull-in from other major markets including the U.S., China and Italy. What's more, some of the capacity expansion plans -- reaching as high as 1 GW to 1.25 GW per solar company -- have sparked fears of a seriously oversupplied sector. The JP Morgan analyst shares these fears, estimating that the solar oversupply in the second half of 2010 could run as high as 3 gigawatts to 4 gigawatts on an annualized basis.
TheStreet spoke with Blansett on Tuesday about his sour solar sentiment and his newfound preference for wind.
TheStreet: What's your basic thematic argument in favor of wind, relative to your solar outlook?
Blansett: It is clear that Europe, which has been driving demand for solar, is basically saying subsidies will be coming down in all the countries -- at different times and at various levels of reductions, but the theme is clear from Europe.
To be completely honest, we never overly warmed up to the solar stocks, but we've never been so overtly negative either. Our research approach is to view sectors on a relative basis, and the fact is that there have been less pure-play alternative energy companies available to investors outside the solar sector.
Wind is a very large sector, yet it hardly gets news flow due to the lack of pure-play wind companies, and with General Electric(GE) being the biggest player.
Yet when you talk to utilities, they look at wind as being the primary driver of their renewable energy generation. Solar is great in California, but what does a utility in Illinois do?
Our negative view of the solar outlook in Europe [being] based on subsidies cannot be separated from how we look at the wind industry, where we see a stable subsidy environment in the next two years. That's a long time for investors, and the three-year time horizon make the underlying fundamentals for wind more attractive than for solar.
TheStreet: So it's overweight wind and underweight solar?
Blansett: Wind industry fundamentals will rebound from a bottom in the first quarter [Editor's Note: Since January, shares of Broadwind Energy lost $3 in value. Since July 2009, when Broadwind shares were at a 52-week high of $12.49, shares are down approximately $6.50.]...MORE