Solar Shining Brightly Going Into 2014

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After more than two years of overproduction and sinking princes, the global solar PV industry launched a comeback in 2013. Estimates for growth in 2014 exceed last year’s growth rate of around 13%, with industry watchers looking for gains of 40 to 49 gigawatts, or 18% to 21% growth in installed capacity.

Now that China has reined in its excess capacity problem, prices have stabilized, and while they will not rise in 2014, neither will they collapse. Margins have also improved as the solar PV makers have wrung out costs. And the best news of all, perhaps, is that most countries have ended or significantly reduced subsidies to solar PV installations. That means that the industry has reached the point where it will have to remove the training wheels and get better at everything it does in order to compete. Here is a look at what’s in store.

First Solar Inc. (NASDAQ: FSLR) has seen its share price rise more than 60% in the past 12 months, and it is the laggard among these five stocks. At around $50 a share, the stock is still well below an all-time high of $190 in May 2009. The company’s shares have come down about 20% since we last looked at the solar stocks in early December, and the consensus price target on First Solar has dropped by a buck to around $45.50. The stock remains overbought, while the fiscal 2014 earnings per share estimate (EPS) of $3.38 yields a forward price-to-earnings (P/E) ratio of 15.17, down from more than 17 a month ago. The shares closed at $51.26 Monday night, in a 52-week range of $24.46 to $65.99.

SunPower Corp. (NASDAQ: SPWR) shares are up about 325% in the past year. The stock closed at $32.44 Monday night, in a 52-week range of $7.41 to $35.39, and the consensus price target is $32.40. So we can say that SunPower, too, is fully valued. The company’s forward multiple is over 27, up from 25 in December, and fiscal 2014 EPS is estimated at $1.20.

GT Advanced Technologies Inc. (NASDAQ: GTAT) stock has risen more than 160% in the past year as demand for its machines used to make solar cells, modules and panels has returned. Shares closed at $9.03 last night, in a 52-week range of $2.61 to $10.75. The stock’s consensus target price is $11.75, which yields a potential upside of around 30%. The snag may be its forward multiple, a whopping 93.2. The stock’s expected 2014 EPS is a meager $0.10.

SunEdison Inc. (NYSE: SUNE), like SunPower, has had a booming year. The share price is up more than 265% in the past 12 months. Shares closed at $14.01 Monday night, in a 52-week range of $3.64 to $14.71. With a price target of around $15.20, the potential upside is nearly 8%. Expected 2014 EPS is $0.56, and the stock’s forward P/E ratio is around 25. The company is planning to spin off its semiconductor wafer business during the first quarter.

SolarCity Corp. (NASDAQ: SCTY) stock is up nearly 300% in the past 12 months, which is virtually the entire time it has been a publicly traded company. Investors have great expectations for SolarCity, even though the company is expected to post a net loss of $1.65 per share in fiscal 2014. Shares closed Monday at $63.61, in a 52-week range of $13.11 to $67.14, and the consensus price target is $62.25. The stock is fully valued, and its market cap of around $5.3 billion now surpasses that of First Solar — $5.1 billion — making it the largest of the U.S.-based solar players. That is a pretty remarkable feat for just one year.

SolarCity is the only growth play among these stocks, while GT Advanced Technology offers the only reasonable value play, if one discounts its very high forward multiple. Both First Solar and SunPower are more than fully valued and would not seem to have much to offer. SunEdison’s planned spin-off could be a boost for investors, but it probably will not be a game changer.