North Coast Solar Stocks

October 16, 2009

With subsidy cuts coming is it time to sell solar?

Filed under: FSLR, SPWR, STP, TSL, YGE — Tags: , , , , , — Jason @ 4:02 pm

Fri Oct 16, 2009 4:02pm EDT

* Anxiety about German subsidy cuts weighs on sector

* One analyst sees opportunity in SunPower

* Analyst cuts two German solars: Q-Cells and SolarWorld

By Laura Isensee

LOS ANGELES, Oct 16 (Reuters) – Shares of U.S.-listed solar companies slipped this week as investors fret over how much and when Germany’s government will cut aid to its solar industry, the world’s top market.

The Free Democrats are joining Chancellor Angela Merkel’s conservatives in the governing coalition and have called for reduced solar supports, fueling speculation on the final form.

Only a small portion of photovoltaic systems that convert sunlight into electricity may see cutbacks, according to a draft proposal by a German coalition working group for environmental policy.

Shares of First Solar Inc (FSLR), Suntech Power (STP), SunPower Corp (SPWRA, SPWRB), Yingli Green Energy (YGE) and Trina Solar (TSL) have fallen 4 to 7 percent since Monday.

With specific changes still uncertain, should investors hold or even pull back on solar shares until a final decision?

Four analysts weigh in:

SVEN KUERTEN, ANALYST WITH DZ BANK:

“Based on this indication from political circles we are now anticipating a reduction in two steps in 2010 and 2011. We are expecting an additional reduction of 5-10 percent for 2010, which means that payments would decline by 15-20 percent overall, and an additional cut of 10-15 percent for 2011. This means that the feed-in tariff would then fall by 20-25 percent overall,” Kuerten wrote .

“Subsidy reductions in Germany are likely to lead to substantial pressure on prices in the module and wafer business in Germany in 2010 and 2011,” said Kuerten, who cut two German solars: SolarWorld to “hold” from “buy” and Q-Cells to “sell” from “hold”.

CHRISTINE HERSEY, ANALYST WITH WEDBUSH MORGAN:

“If you’re a very short-term investor and think stocks will go up (with earnings) and can handle the lack of visibility, you may want to hold these names into earnings. If you’re thinking longer term, it may be good to pull back a little bit now and let the dust settle and come back in early 2010.”

JOHN HARDY, ANALYST WITH BROADPOINT AMTECH

“In general I think the anxiety created around the issue in Germany has created an opportunity in stocks that are not as tied to the German market. Beginning next year you’re going to see a lot of demand (for solar panels) finally come to the U.S. SunPower is one company, for instance, that is very exposed to the U.S. and will see dramatic increase in demand from that movement to the U.S. It’s almost creating an opportunity for companies that have the luxury to go elsewhere.

“First Solar right now has a lot of exposure to Germany … There’s a high concentration now but there’s going to be pretty significant diversification over the next two years … Trina and Suntech have exposure elsewhere. I think in general it would have the most negative effect on the European players.”

PAVEL MOLCHANOV, ANALYST WITH RAYMOND JAMES & ASSOCIATES

“I don’t think people should be making a change in their investment approach purely because of this uncertainty over what’s going to happen in Germany … I don’t think this is something where one company would be automatically better positioned than another.”

(Additional reporting by Christoph Steitz in Frankfurt; Editing by Gary Hill)

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