North Coast Solar Stocks

August 14, 2009

Spotlight on Solar Stocks

Filed under: FSLR, SOLF, STP, TSL, YGE — Tags: , , , , , — Jason @ 12:42 pm

By Billy Fisher

As the Clean Energy Summit winds down in Las Vegas this week, a number of solar companies will be gearing up to release their earnings next week. Several are expected to report profits. This trend could help build the argument that there are in fact clean, economical energy sources out there. Here’s what to look for next week.

Healthy Margins

China-based Trina Solar (TSL) has been off to the races so far in 2009. Year-to-date the stock has risen a staggering 215%. The company produces and sells photovoltaic (PV) modules to a global base of customers, and that base has been growing. When the company reports its Q2 results on Monday, Trina is expecting net revenue to be down a little more than 25% compared to a year ago, but gross margins to be up 14.3%. The company recently offered up full year guidance that calls for a 74-99% increase in PV modules shipments compared to 2008. Analysts are expecting EPS to be down 37.5% at Trina this year and total revenue to fall by 15.7%. The company has been experiencing lower selling prices for its modules, but this trend has been partially offset by lower material costs and Trina’s success in pushing down its other manufacturing costs.

Solarfun Power Holdings (SOLF) is another player in the PV module space that has been encountering some of the same challenges as Trina. Also based in China, Solarfun has seen its stock price climb 50% so far this year. Analysts are expecting the company to post a net loss of 4 cents per share when the company reports earnings on Tuesday, but gross margins continue to improve on sharply reduced input costs.

Growing Capacity

Another solar company out of China that has seen its stock price more than double this year is Yingli Green Energy (YGE). When the company announces its quarterly results on Wednesday, analysts will be expecting the company to report a 26.3% decline in sales, but still finish in the black. The consensus is 4 cents per share. Yingli is considerably smaller in size when compared to First Solar (FSLR), a company that many regard as the industry leader, but has encouraging growth prospects. Yingli is mapping out expansion plans that will greatly increase the company’s current capacity. By the fall of last year, Yingli had reached an annual production capacity of 400 megawatts (MW). The company is setting up to hit 600MW this year. Yingli also recently entered into a joint venture with a state-owned enterprise in China where it will work to build manufacturing facilities with an annual production capacity of 100MW.

Suntech Power Holdings (STP) is likely to eke out a profit when it reports its results late next week. The story should be similar to that of its peers – year-over-year revenue will take a hit, but margins have been improving. With 80% of the company’s Q1 revenue coming from its European operations, the company is now looking to diversify its portfolio by expanding its existing presence in the U.S. and China.

The Bottom Line
Market conditions have been less than ideal for solar companies, but the industry is continuing to evolve. Raw material and production costs are coming down across the board and gross margins are improving. I am expecting these names to hold their ground after a challenging Q2, and be well-positioned to capitalize on future upticks in demand for solar power

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