Energy Business

Solar Stocks Run Bright, Performance Looking Tired (FSLR, LDK, JASO, CSIQ, TAN, BP, ESLR, ASTI)

Jon C. Ogg

Is it a jinx to say that a sector has risen too much?  Sometimes, but the recent run up in solar shares ahead of earnings season is looking like many key names have much more than just good news priced in.  Solar stocks have gained on news that orders are coming in stronger than expected in many cases, but there was also a rising stock market that coincided with a general rise in oil over the last month.

The runs have been in some cases mammoth and the news flow is still positive so far this week.  Whether oil’s recent pullback continues and whether DJIA 11,000 can continue is one thing.  Whether the run up in key solar names can be sustained is another situation.  A flag may be here in First Solar, Inc. (NASDAQ: FSLR), and we have seen huge runs in LDK Solar Co., Ltd. (NYSE: LDK), JA Solar Holdings Co., Ltd. (NASDAQ: JASO), Canadian Solar Inc. (NASDAQ: CSIQ).  Even the Guggenheim Solar ETF (NYSE: TAN) has not been neglected.

Industry-giant and leader First Solar, Inc. (NASDAQ: FSLR) is part of the reason we have a flag on the run-up as a pullback in the sector leader can often signal that other gains may need a breather as well.  This is the industry leader and peaked at just over $151.00 on September 30.  Now shares are back under $140.00  and closed at $137.01 with a whopping $11.7 billion market cap.  Still, the low in August was close to $123.00 and even closer to $103.00 at the peak selling early in the summer months for nearly a 50% run from trough to peak.  The company’s raised solar production guidance seems to have been known ahead of time, but we still have no real revenue and earnings guidance.  Without that, all you can presume is that margins in the sector are likely still compressing.  With its last quarter cost running at $0.74/MW and still declining, it will be interesting to see what the company can add and if it was able to stave off any of the ongoing industry margin pressures.

LDK Solar Co., Ltd. (NYSE: LDK) recently surged after the China-based PV maker raised its third quarter outlook.  As far as the guidance, it was raised to $610 to $640 million from $570 to $600 million and its Q3 wafer shipments were hiked to 550-570 megawatts, more than 5% above prior targets.  Shares just this week have run from under $10.00 to nearly $11.50 before the 1.6% drop Tuesday to $11.14.  In short, this move up was a 52-week high, the stock was nearly $6.50 in August, and shares were down all the way under $6.00 in June.  Oil has risen, stocks have risen, and things have gotten better for the company.  The market cap is still only $1.4 billion, but this move in total represents nearly a 75% gain since August’s lows.

JA Solar Holdings Co., Ltd. (NASDAQ: JASO) has been a winner in solar PV cell products, in part on a recent deal to supply solar cells to none other than BP plc (NYSE: BP).  BP may be hated for its oil rig disaster in the Gulf, but BP is the king of solar when it comes to oil companies.  The Shanghai-based operation just hit a new 52-week high on Tuesday at $9.58, and that is over 160% above a 52-week low.  In August the stock was hitting $5.50 and the 1% drop on Tuesday still has the stock at $9.32.  The market cap is now $1.5 billion and amazingly its recently hiked guidance and hiked estimates still has the valuations low at under 10-times forward expectations.  Again, the issue to watch is margins just like it is in all PV cell companies tied to solar.