Trying To Find Growth Potential in Solar Stocks (AMAT, FSLR, WFR, GTAT, SPWR, STP, TSL, LDK, JASO)

The solar sector took a severe beating in 2011 as module prices fell by more than 40%. The bleeding has stopped for now, and most of the solar makers have worked through their inventory problems and are looking forward to some improvement in the coming year.

It’s not to harsh to say that analysts have gotten pretty fed up with the solar makers. Price targets fell so low that they might have lost all meaning. Many of these companies have now risen past their targets, but it’s less a function of good performance and more a function of low expectations. We’ve looked nine solar-related companies to see what might be in store for them this year.

The stocks we’ve looked at are Applied Materials, Inc. (NASDAQ: AMAT), First Solar, Inc. (NASDAQ: FSLR), MEMC Electronic Materials, Inc. (NYSE: WFR), GT Advanced Technologies, Inc. (NASDAQ: GTAT), SunPower Corp. (NASDAQ: SPWR), Suntech Power Holdings Co. Ltd. (NYSE: STP), Trina Solar Ltd. (NYSE: TSL), LDK Solar Co. Ltd. (NYSE: LDK), and JA Solar Holdings Co. Ltd. (NASDAQ: JASO).

Applied Materials, Inc. (NASDAQ: AMAT) has a consensus target price of $14.47, and shares are trading today at $12.84, for an implied gain of 12.7%. Applied is the only company in this group that pays a dividend. The company hammered expectations in its first fiscal quarter and forecast revenues and earnings for its second quarter that were also above existing estimates. Demand for smartphones and tablets appears to be driving demand for the company’s foundry equipment, while Applied’s solar business posted revenue for the quarter that amounted to just a third of the division’s revenue in the same period a year ago.

First Solar, Inc. (NASDAQ: FSLR) has a consensus target price of $43.55, and shares are trading today at $40.78, for a potential upside of 6.8%. First Solar is the largest of the solar panel makers measured by market cap. The company’s low-cost leadership has been challenged by the constantly falling prices of crystalline solar manufacturers, and there’s little reason to expect a dramatic change here. A target price rise to $50 or so is likely, but could be out of reach.

MEMC Electronic Materials Inc. (NYSE: WFR) has a consensus target price of $6.14, and shares are trading today at $4.55, for an implied gain of 35%. MEMC posted a loss in its most recent quarter on soft demand for its chips. The company, like First Solar and SunPower, also owns a solar project development company, SunEdison, but there are scant hopes for any growth in utility-scale solar developments. Installations of rooftop systems may increase, but so far only SunPower has made any substantial move in that direction.

GT Advanced Technologies, Inc. (NASDAQ: GTAT) has a consensus target price of $12.70 and shares are trading today at $9.29, for an implied gain of nearly 37%. The company posted better-than-expected earnings for the fourth quarter, but didn’t offer an upside surprise on guidance. Formerly known as GT Solar, this company had a breakout first half of 2011 as the expansion of China’s manufacturing capacity created high demand for GT’s specialized manufacturing equipment. Now that capacity exceeds demand, new orders have slowed and prospects for growth are dimming.