Solar rally is cut short

Companies face major hurdles as European support for the industry lags.

By Trefis Jun 15, 2012 12:21PM
Trefis Image: Solar energy (© Mick Roessler/Corbis)Shares of solar panel manufacturers Suntech Power (STP) and First Solar (FSLR) fell this week, just after the companies posted strong gains as Jefferies & Co. analyst Jesse Pichel questioned the view that demand for panels would be stronger than previously anticipated.

According to Pichel, European markets such as Germany, Italy and Greece continued to show signs of weakness. Higher demand for solar equipment was unlikely under the present macroeconomic picture in Southern Europe.

Solar companies have faced major problems over the last year as major European markets have seen large cutbacks in support for the industry.

We have a $2.70 price estimate for Suntech Power, which is at a 55% premium to its current market price.

Suntech Power Stock Break-Up

Weak outlook

Shares of solar stocks showed gains on Tuesday after First Solar announced that it would extend production in its German plant as demand was higher than its previous estimates. The news was interpreted as a sign that sales in European markets would remain robust through the year despite subsidy cuts in Germany. However, according to Pichel, his interviews with industry sources suggest that financing issues and macroeconomic uncertainty in the region were driving down sales. Sales in major markets such as Germany and Italy were below expectations and according to Pichel, unlikely to post robust growth.

The latest report from Jesse Pichel, ties in with the broader picture of the solar industry. Demand for solar equipment is moving from Europe to the U.S. and to emerging markets such as China and India. Panel sales in the U.S. posted sharp growth in Q1 this year. Sales in these new markets are being spurred by falling equipment costs and government programs to spur the clean energy industry. Suntech and other manufacturers are scrambling to gain a foothold in these new markets. In particular, Suntech is looking to capture sales in the China, which is expected to add between 3 to 5 gigawatts of solar capacity in the current year.

More from Trefis

Jun 16, 2012 8:56PM
The stocks listed in the article have not just fallen for the week, Suntech has been falling since the high in 2007 of 85.16, and have certainly been falling since the begining of the year.  FSLR saw it's high of more than 300 in 2008 and has fallen since.  Even a year ago it was listed for 133, and has done little but to fall to the date of this article to 12.  Simply a rubbish article
Jun 15, 2012 1:10PM
When you report on the Solar Panel industry, please be sure to refer to them in that way in the future, not just " Solar".  There is a Business Development Company called Solar Capital, Inc., symbol SLRC, of which I own 2,000 shares.  Postings under the generic heading of "Solar" confuse me, and probably others.
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