North Coast Solar Stocks

July 24, 2009

SunPower, LDK lead solar stock rally, MEMC slides

Filed under: CSIQ, CSUN, ENER, FSLR, LDK, SPWR, WFR, YGE — Tags: , , , , , , — Jason @ 3:07 pm

Fri Jul 24, 2009 3:07pm EDT

* SunPower shrs rally 27 pct after Q2 earnings top view

* LDK soars 11.5 pct on raised outlook, lifts solar sector

* MEMC stock slumps 10 pct after two analyst downgrades

By Nichola Groom

LOS ANGELES, July 24 (Reuters) – The shares of solar companies surged on Friday after U.S. panel maker SunPower Corp (SPWRA, SPWRB) posted better-than-expected earnings and China’s LDK Solar Co (LDK) raised its sales forecast.

SunPower shares rallied 27 percent to $31.52 after the U.S. company’s earnings, announced late on Thursday, easily beat analysts’ forecasts, while China’s LDK saw its stock rise 12.2 percent to $11.56.

The shares of Chinese solar cell maker China Sunergy Co Ltd (CSUN) also rallied, jumping 11.5 percent to $5.53 after the company said quarterly shipments exceeded expectations and it expects to return to profitability in the second quarter.

Analysts at Citigroup, Canaccord Adams, Credit Suisse, FBR, and Collins Stewart all raised their price targets for SunPower shares. FBR and Collins Stewart also upgraded their ratings on the stock, FBR to “outperform” from “market perform” and Collins Stewart to “hold” from “sell.”

“Although we expect solar stocks to be volatile through (the second-quarter’s) earnings season, our upgrade is more company-specific, driven by the increased business prospects in the ‘rooftop’ segment of the market, which is SunPower’s sweet spot,” FBR analyst Mehdi Hosseini said in a note to clients.

Wedbush Morgan analyst Al Kaschalk, meanwhile, downgraded SunPower shares to “neutral” from “outperform,” saying price competition, high inventory levels and a continued lack of financing in the market continue to impact results, while the stock is fully valued following recent share gains.

Solar stocks have suffered in recent months as the credit crisis dried up financing to build new green-power systems and led to a glut of solar panels in the market.

But new incentives in China and the roll-out of fresh subsidies in the United States, as well as a modest improvement in credit availability, have helped trigger renewed investor interest in the sector.

Many solar stocks also have sizable short positions. About 15.5 million SunPower shares were held in short positions as of June 30, an increase of 9.6 percent from two weeks earlier. That’s about 16 percent of the company’s 98.4 million shares outstanding as of June 28.

About 18 million LDK shares are held in short positions as of June 30, or about 16 percent of the company’s shares outstanding as of March 31. That was an increase of 14 percent in the company’s short position from the previous two weeks.

The news from SunPower and LDK pushed up shares of U.S.-listed solar rivals including First Solar Inc (FSLR), which climbed 7 percent to $169, Canadian Solar (CSIQ), up 7.2 percent at $15.39, Yingli Green Energy (YGE), up 9.4 percent at $14.84, and Energy Conversion Devices Inc (ENER), up 10.5 percent at $14.90.

The announcements also lifted European solar stocks including Germany’s Q-Cells, which closed up 5.4 percent, and SolarWorld, which rose 2.7 percent. Norway’s Renewable Energy Corp also rallied, closing up 4.1 percent.

Not every solar company enjoyed a bounce, however. Shares of U.S. silicon maker MEMC Electronic Materials Inc (WFR) tumbled 10.4 percent to $18.69, despite the company’s second-quarter earnings having surpassed quarterly earnings forecasts, as both Oppenheimer and RBC Capital Markets downgraded the stock.

MEMC late on Thursday reported higher-than-expected revenue and earnings, helped by improved demand from the semiconductor industry, but gross margins fell below estimates as prices on the key raw material in semiconductors and solar panels have collapsed in recent months.

“The company faces structural share deterioration and sustained margin pressure,” RBC analyst Stuart Bush said in a note. “Our key concern is continued irrational silicon capacity additions from new entrants, who we believe will increasingly sell below cost to gain share.”

RBC downgraded MEMC to “underperform” from “sector perform,” while Oppenheimer cut its rating on the stock to “perform” from “outperform.”

In other less-than-stellar solar news, German solar equipment maker Singulus Technologies AG said it would slash 11 million to 12 million euros in costs by cutting about 190 jobs.

“The market for solar technology has virtually ground to a halt since last autumn,” Singulus said in a statement, adding that it expected the market to recover in 2010.

The company’s stock closed down 10.6 percent following the announcement.

(Reporting by Nichola Groom and Matt Daily; Editing by Tim Dobbyn, Gary Hill)

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