Some Good News in Solar, On A Rainy Day (SPWRA, LDK, JASO, YGE, TSL, TAN)

The secret is falling prices for crystalline solar PV cells and modules and heavy demand, especially from Germany. Germany cut its tax rebates on solar PV installations in July, and demand for solar panels was pulled forward to take advantage of the more generous rebates.

As a result of its good showing for the second quarter, SunPower’s target price was raised from $11/share to $13/share at KBRO Kaufman Brothers. The firm also raised its EPS estimate from $0.09 to $0.37 for 2010, and maintained a ‘hold’ rating on the stock.

LDK absolutely hammered estimates and then offered new guidance for 2010. The company’s full-year revenue forecast jumped from $1.6-$1.7 billion to $1.95-$2 billion. Wafer shipments, previously forecast at 1,700-1,800 megawatts, are now expected to reach 1,950-2,000 megawatts. The low end of module shipments was boosted from 200 megawatts to 250 megawatts though the high end remained at 300 megawatts. The company estimates third quarter revenue of $570-$600 million, well above consensus estimates of $422 million.

JA Solar also raised its guidance on shipments by 35% and its estimate of manufacturing capacity at year-end by 20%. Shipments in the first six months of 2010 surpassed shipments in all of 2009, and second-quarter shipments surpassed total 2008 shipments.

Still on tap in the solar PV space are Yingli Green Energy Holding Co. Ltd. (NYSE:YGE) which reports on August 19th and Trina Solar Ltd. (NYSE:TSL) which reports earnings on August 24th. Yingli is expected to report EPS of $0.19 on revenue of $371.09 million. Trina is expected to post EPS of $0.49 on revenue of $334.75 million.

None of this quarter’s good news is likely to boost share prices much because there are a number of issues facing the solar industry. First, the general macroeconomic situation is no better than uncertain, and the solar industry relies heavily on support from governments to buyers of solar products. Second, prices are falling and that will put pressure on margins.

Against those negative indicators, solar makers point to full or nearly-full order books going into 2011. Some, like Yingli, Trina, and JA Solar, are low-cost manufacturers and could actually grow its market share as overall growth for solar modules slows.

There’s really only a couple of things that generally apply to the solar sector. It’s volatile and uncertain, and as a result, most investors don’t play the long game with solar shares.

Solar shares are following the market down. SunPower is off less than 1% and LDK is off about 1.3%. JA Solar is down nearly 8%, Trina is down about 6%, and Yingli is down about 5%. The Claymore/MAC Global Solar Energy ETF (NYSE:TAN) is also down about 5%

Paul Ausick