North Coast Solar Stocks

June 1, 2009

Solar: Street Feeling Upbeat After Intersolar Conference

Filed under: CSIQ, ENER, FSLR, JASO, LDK, SOLF, STP, TSL, YGE — Tags: , , , , , — Jason @ 11:45 am

Posted by Eric Savitz

It’s a nice day for the solar sector, which is getting a boost from a flurry of analyst comments following the recently completed Intersolar trade show in Munich.

“By the end of Intersolar, we sensed growing, albeit cautious optimism,” Cowen’s Robert Stone writes in a research note this morning. “ASPs are still uncertain, but volumes should definitely be up in Q2/Q3, and deals were starting to close.” He says that despite a strong rebound in the stocks since early March, the group “remains mostly undervalued.”

Likewise, Thomas Weisel Partners analyst Jeff Osborne writes that “it appears demand trends in Europe are accelerating with many companies indicating a 40%-100% increase in units in Q2 sequentially, lead mainly by Germany with some credit easing in Mediterranean countries a well.” Osborne writes, however, that the solar market remains “dysfunctional in many regards, with the demand outlook flattish at best in 2009 vs. 2008.” He contends the recent rally reflects a rising Euro, an increase in oil prices and a return to investing in high beta names.

Barclays Capital analyst Vishal Shah writes that several German distributors have placed new orders with Chinese module players, “suggesting to us that inventory levels are depleted and product is getting installed.” He says checks suggest both Suntech (STP) and Yingli (YGE) won significant business at the show, and that distributors are shifting toward lower ASP product to increase margins. Shah remains bullish in Yingli and JA Solar (JASO), while advising profit taking in Canadian Solar (CSIQ) and Solarfun (SOLF).

FBR Capital’s Mehdi Hosseini writes that while the buzz was about the pickup in project activities and the associated procurement, “what we observed is that [a] majority of discussed projects have yet to be financed!” He also writes that after meeting with more than 40 companies at the conference, “many cell and module manufacturing companies have become incrementally positive and optimistic,” with project activity picking up. However, he adds that “as the discussion carried to contracts from downstream companies…the level of enthusiasm lessened somewhat.”

Here’s a rundown on some of today’s calls:

* Suntech (STP): Credit Suisse analyst Satya Kumar upped his rating on the stock to Neutral from Underperform, with a price target of $16.50, up from $8.50. “We were previously concerned about excessive expectation of Chinese demand in STP’s stock, industry oversupply and balance sheet.” But he writes that post the conference, he reports that several banks expressed comfort banking solar projects that have panels from Suntech and Yingli but not other Asian vendors. Kumar also says China is set to announce a new feed-in-tariff for ground-mounted installations. Also this morning, Morgan Stanley’s Sunil Gupta upped his rating on the stock to Overweight from Equal Weight, with a target of $20.10, up from $7. He cites three drivers for the stock: sharper-than-expected ASP declines, providing demand elasticity when credit conditions thaw; industry focus on cost reduction; policy tailwinds once the economy starts to heal.
* Trina Solar (TSL): Collins Stewart analyst Dan Ries repeated his Buy rating, and raised his target to $30, from $22.
* Yingli Green Energy (YGE): Piper Jaffray’s Jesse Pichel repeated his Buy rating and raised his target to $17, from $13, citing “strong Intersolar data points and multiple expansion in the peer group.”
* First Solar (FSLR): UBS analyst Stephen Chin repeated his Buy rating and boosted his target to $225, from $180. He says checks find spot polysilicon prices have been at $80/kg for the past 3 weeks as new entrants from China have stopped lower prices as they may have reached a price equal to manufacturing costs. (First Solar doesn’t use poly; declining prices on poly erodes its price advantage over silicon based systems.)
* Finally, Think Equity analyst Colin Rusch launched coverage of a number of solar stocks, and is bearish on all of them. He began Energy Conversion Devices (ENER), LDK Solar (LDK) and Canadian Solar with Source of Funds ratings, while starting JA Solar with a Sell.


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