Solar Stocks Get a Boost That Can't Last (STP, YGE, FSLR, LDK, TSL, SOL, JASO, TAN)

After weeks of bad news have sent solar stocks further and further into a dark pit, a couple of earnings reports from Suntech Power Holdings Co. Ltd. (NYSE: STP) and Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) have put some life back into the sector. This is one sector where the absence of bad news now replaces any good news.

Riding the coattails are First Solar Inc. (NASDAQ: FSLR), LDK Solar Co. Ltd. (NYSE: LDK), Trina Solar Ltd. (NYSE: TSL), SunPower Corp. (NASDAQ: SPWRA), and ReneSola Ltd. (NYSE: SOL). Missing out on the fun is JA Solar Holdings Co. Ltd. (NASDAQ: JASO), which reported negative operating margins last week. The other solar stocks suffered, but JA Solar is in a class by itself.

Yingli’s second quarter report last Friday showed shipments up by 37% sequentially, with revenue up 27% year-over-year and EPS of $0.34. Gross margins fell from 27.3% to 22% sequentially and by more than 33% year-over-year. Suntech this morning reported an adjusted EPS loss of -$0.19 on a 33% rise in revenue and adjusted gross margins of 15.1%, down from 19.7% a year ago.

Both companies predict that shipments will either be inline with previous forecasts (Yingli) or increase by 15% in the third quarter (Suntech). Suntech also reported an increase of shipments by 48% year-over-year and 2% sequentially in the second quarter.

All those new shipments from Suntech will further lower margins, to a newly forecast level of 11%-13%. Yingli said nothing about its margins for the rest of the year, but did re-iterate its shipment forecast for the fiscal year at 60%-65% higher than the 2010 fiscal year.

Suntech, which is the world’s largest maker of solar panels, can afford to ship more at lower margins simply because it ships so many panels. Yingli, a more vertically integrated supplier, is able to withstand some of the pricing pressure on rising module volumes.

First Solar, the world’s low-cost provider, is able to withstand the pricing pressure as well, but it’s margins are taking a beating as the silicon-based Chinese suppliers continue to lower their costs.

The story on margins is that they will continue to fall for everyone. Only those companies that can withstand the margin pressure will remain standing. This is putting some energy in the solar stocks today because investors believe the gainers will survive. But there are still too many solar players for all of them to make it, especially as manufacturing capacity continues to grow. Today’s boost is likely to be short-lived.

In the late morning today, Suntech shares are up more than 3%, to $5.26, in a 52-week range of $5.10-$10.83. Suntech shares posted that 52-week low last Friday. Yingli shares are up nearly 6%, to $5.57, in a 52-week range of $5.00-$14.29. First Solar shares are up about 1.5%, at $90.06, in a 52-week range of $87.82-$175.45. LDK shares are up about 1.5% as well, at $5.14, in a 52-week range of $4.65-$15.10.

JA Solar shares are getting another beating today, down more than -5% at $3.30, barely within the 52-week range of $3.28-$10.24. The Guggenheim Solar ETF (NYSE: TAN) is up about 0.8%, at $4.92, again just a few pennies inside the 52-week range of $4.88-$9.34.

Paul Ausick