North Coast Solar Stocks

April 22, 2009

Citi Says Installers See 10%-25% Module Price Cut

Filed under: ESLR, FSLR, SPWR, WFR — Tags: , , , , , — Jason @ 12:00 pm

Posted by Eric Savitz

The recent slide in solar module pricing is far from over, according to a Citigroup survey of U.S. solar installers.

Citi analyst Timothy Arcuri writes that his survey found module prices of $3-$3.50/watt at most installers over the last three months; he says the majority of those surveyed expected a decline of 10%-25% over the next three months, suggesting prices in the $2.50 to $2.75 range in the June quarter.

Arcuri says the installers “remain positive on the general demand outlook for solar” over the next 3 months, with most expecting a sequential increase in installations in the June quarter over the March quarter. But he also noted that most expect a flat-to-down quarter year over year, “with financing conditions still very difficult for their end customers and not likely to improve meaningfully during this time.”

As for the supply picture, he says the installers reported good access to supply of solar modules, with no changed expected in the next 3 months; he interprets this to mean that “upstream inventory levels will remain elevated.” He also notes that the majority of installers said that brand loyalty is an unimportant factor in choosing a supplier; price is the more critical factor.

Meanwhile, Arcuri tweaked numbers on some solar stocks heading into Q1 results:

* For Evergreen Solar (ESLR), he now sees a 2009 loss of 22 cents, worse than his old forecast of a loss of 2 cents. For 2010, he now sees a loss of 5 cents a share, rather than a profit of 8 cents; and for 2011 his loss estimate widens to 46 cents, from 42 cents. The revised estimates reflect “continued pricing pressure on ASPs.” He maintains his Hold rating and $1.50 target, which is above yesterday’s close at $2.11.

* For SunPower (SPWRA, SPWRB), he now sees 2009 EPS of just 39 cents, down from $1.51; for 2010 he goes to $1.90, from $2.57, and for 2011, $2.95, down from $2.98. In all cases, he is well below consensus. Again, the cuts reflect weak pricing. He keeps his Sell rating and $15 price target, which is sharply below yesterday’s close at $25.30.

* For MEMC Electronic Materials (WFR), his 2009 EPS estimate drops to 5 cents from 12 cents; for 2010, he goes to 98 cents, from $1.53, and for 2011, he now expects $2.34, down from $2.99. Arcuri likes the stock long term, but adds that “poly supply overhand remains big and it still remains unclear how reliant new management wants to be” on the spot market, which he expects to remain under pressure for another few quarters. The estimate cuts, he says, reflect “significantly lower” assumptions on polysilicon contract pricing. He keeps his Hold rating and $15 target, just above yesterday’s close at $14.03.

* For First Solar (FSLR), he maintains a Hold rating, but ups his target to $150, from $130, which gives him some new headroom given yesterday’s close at $140.14. He also increased estimates on the company, going to $6.56 from $6.16 for this year, and $8.31 from $7.60 for next year, but cutting 2011 to $9.44, from $11.45. But he notes that “near-term pricing reset remains a potential fly in the ointment,” and that “margins continue to undergo secular compression.”


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