Solar Bear Tells Barron’s Outlook Is Cloudy

Posted On September 29, 2010 | by AllenCaron

If you believe solar analyst Aaron Chew, the solar industry is in for a pretty major slowdown. At least that’s what he told Barron’s last week during a Q&A that ran under the headline: ‘Solar Outlook: Cloudy.’

Chew, who launched his solar coverage for Hapoalim Securities last July, lists oversupply and a retrenching of government programs as the culprits in the decline of the solar market and says Europe has been “the big driver of solar” for many years. He expects Germany’s solar installations to hit 6 gigawatts this year–more than Japan, the U.S., Italy and France have installed combined in all their histories. But during the next four months governement incentives will decline by double-digit percentages, taking the installation rates down with it.

On the supply side, along with declining installations comes the entrance of three large new players in the global solar market: Samsung, LG and Hyundai, which will ultimately push down solar prices, according to Chew. That may be good for homeowners and commercial installations but perhaps not so good for the profit margins of smallcap solar companies. A good place to check on the progress of the U.S. solar business is the Solar Power International conference set for Los Angeles Oct. 12-14 (http://www.solarpowerinternational.com/sepa2010/public/enter.aspx). It’s considered the nation’s biggest and best conference each year.

We’ve been following the progress of several small cap solar firms for the past few years and, as is the case in most industries, some seem to be thriving while others struggle, based on the issues inside of each company.

Marlboro, MA-based Evergreen Solar (Nasdaq: ESLR, http://www.evergreensolar.com) is one of those continuing to struggle and their issues have been well documented (http://seekingalpha.com/article/226927-ceo-departs-troubled-evergreen-solar?source=yahoo), including the recent departure of their CEO. Evergreen’s stock, while trading relatively heavily (1.5 million shares a day on average) still languishes around 62 cents a share, not far from the 65 cents a share it was selling for when we last checked in early August.

China-based Renesola Ltd. (NYSE: SOL, http://www.renesola.com) also trades actively (nearly 2 million shares a day) and this week was selling for nearly $11.50 a share, just below its 52-week high of $12.10 (and way off 52-week low of $3.50), and nicely above our last check in early August. Back then SOL was selling in for about $7.35 range so perhaps, if you believe Chew, now might be the time to take some profits off the table.

Shanghai-based JA Solar (Nasdaq: JASO, http://www.jasolar.com) has also been enjoying a good run. Back in early August the company’s market cap was $897 million and the stock price was in the mid-$5 range. This week the stock is in the mid0$8 range and its market cap has ballooned to $1.37 billion.

China-based Solarfun Power Holdings (Nasdaq: SOLF, http://www.solarfun.cn/einfo.htm) is another solar company we are just beginning to watch. The company manufactures and sells photovoltaic cells and modules as well as silicon ingots and wafers, among other products. It’s relatively small (market cap $723 million) and currently trades at a bout $12.50 a share, right at the top of its 52-week range.

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