A Solar Comeback Predicted in 2012 (YGE, FSLR, SPWR, STP)

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Battered solar PV stocks could be setting the stage for a comeback in 2012. One thing’s for sure though — solar PV prices can’t drop another 50% this year.  Solar makers Yingli Green Energy Holdings Co. Ltd. (NYSE: YGE), First Solar Inc. (NASDAQ: FSLR), SunPower Corp. (NASDAQ: SPWR) and Suntech Power Holdings Co. Ltd. (NYSE: STP) have to figure out a way to stop the bleeding. Global demand is expected to grow 6% in 2012, with growth outside of Europe slated to gain 43%.

Rather than chasing market share, solar makers need to hold the line on supply increases, keep inventories under control, and, most important, return to profitability. The CEO of Taiwan’s Giga Solar Materials Corp. told Digitimes that he expects the market for solar panels to improve by the second quarter of the year.

Giga Solar makes the conductive aluminum paste used in solar cell manufacturing, and the company expects sales growth of 10-12% in 2012. Sales of silver paste are expected to post “tremendous growth” this year.

This prediction is based on fourth-quarter 2011 inventory clearing which should restore the supply/demand balance and help stabilize prices. Then production needs to be rationalized.

According to Solarbuzz, total shipments in 2012 need to be reduced by 4,900 megawatts from the industry’s goal of 28,200 megawatts. The industry research firm also notes that year-end inventories are estimated to be around 7,300 megawatts, down from a previous estimate of 8,600 megawatts.

The first calendar quarter of the year is a traditionally tough one for solar makers as the weather makes installations problematic. During the first quarter we could see prices and margins continuing to fall. As the weather improves so should demand, although Germany’s 15% feed-in tariff reduction will like cause a further decline in orders from German buyers.

The report in Digitimes is giving solar stocks a shot in the arm today. Yingli is up more than 8% at $4.11 in a 52-week range of $2.75-$13.59. First Solar shares are up more than 5% at $35.50 in a 52-week range of $29.87-$175.45. Sunpower’s shares are also up more than 5% at $6.56 in a 52-week range of $4.94-$23.36. Suntech shares are up about 3.5% at $2.29 in a 52-week range of $1.70-$10.83. The DJIA is up nearly 2% this morning.

Paul Ausick

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