Wednesday, September 15, 2010

Solar: SMA Warns on Margins, Power-One Spanked (PWER)

The stock closed down 13.35% at $9.67. In early after-hours action it has only regained seven pennies.
From Tech Trader Daily:
Shares of Power-One (PWER), which makes solar inverters, have been hard today after rival SMA Solar warned that it expects a sharp drop in margins in 2011 as some countries reduce solar subsidies. Germany-based SMA Solar is the world’s largest provider of solar inverters, which are used to convert the DC power generated by solar cells to AC current.

SMA said it expects its EBIT margin for next year of 21%-25%, down from an estimated 26.5%-28.5% in 2010....MORE 
From TheStreet:
Solar Stock Losers: Power-One
It's been quite a ride up for solar inverter company Power-One(PWER) in 2010, with a year-to-date return of 140%. Some recent negative pressure on Power-One shares, including big selling on Wednesday, suggests that the solar inverter company is firmly on the radar screen of investors, from the longs to the shorts, who like to dabble in volatile solar stocks. 

A likely reason for the big selloff in shares of Power-One was an update to the markets from the largest solar inverter company in the world, Germany's SMA Solar.

SMA Solar said on Wednesday that operating margins would drop next year as falling subsidies cause the solar market to shrink. 

Power-One management has stated publicly that its current margins have to come down from the nosebleed levels, but Power-One has also been on the bull side of the solar demand story, contending that other geographies will make up for the feed-in tariff declines in Germany, and expected cuts in Italy.

The commentary from SMA about 2011 is really nothing new, and the debate about 2011 in solar has been taking place for months already. However, controlling almost half of the inverter market, SMA's visibility probably has more weight than many other solar companies. 

The current demand frenzy in solar led SMA Solar to again raise its guidance for 2010 earnings, but it's the more sober 2011 outlook that is having the negative impact on Power-One.

SMA stated that in 2011 the market could grow by up to 20%, but it wouldn't rule out a slump of 10% if subsidy cuts are worse than expected. This is also nothing new, and anyone closely watching the solar industry knows that if subsidy cuts, which are unpredictable, are worse than expected, there will be a huge impact on all companies in the sector. 

Liquidity in Power-One shares, a company which came from nowhere two years ago to be among the largest solar inverter companies in the world today, is also showing signs of maturity, with average daily volume now over 5 million shares. Trading in Power-One shares surged past that daily average early in the afternoon on Wednesday. It still may not be in Citigroup territory, but for a solar inverter stock. it's a significant trading level....MORE

I told ya, Rosenbaum is good.
Not as prolific as Savitz (Tech Trader Daily) but he knows the alt-energy stuff like no other journalist I'm aware of.

Power-One to invest $10 million in Arizon Manufacturing/R&D Facility (PWER)
"Best in Class: Power-One Poised to Invert Solar Stocks" (PWER)
The stock is up 46 cents (4.26%) at $11.21.
I like the phrase "Best in Class".
Companies that earn the moniker usually return a bit less than the riskier stuff (I can't find them this second but there have been a few academic papers that make the point) but allow you to sleep the sleep of the innocent....
After the Crash of '87:
"I slept like a baby"
"Woke up every hour and cried"