Solar Stocks Plummet Despite Obama Victory
With Obama as President-elect, solar stock prices must be sky high at the moment, right? Wrong. If you look at the values of most stocks around election day, they did increase. This peak was short lived however for most solar companies and it was followed by a huge decline.
Just how steep are we talking?
Akeena Solar
(NASDAQ:AKNS) is a large US-based solar installers for residential and commercial systems in California, New Jersey, New York, and Connecticut. Their stock was valued at nearly $17 at the beginning of the year and is now just above $2.
Ascent Solar
(NASDAQ:ASTI) is based in Colorado and produces high efficiency, thin film solar products. They saw stock prices rise to over $25 a share at the beginning of the year, but are currently under $4.
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Evergreen Solar
(NASDAQ:ESLR) is an American company that develops and manufactures solar modules and cells primarily to Europe and the US. It had stock valued at $18 at the beginning of the year and is now just above $3.
First Solar
(NASDAQ:FSLR) is an American company specializing in large-scale solar power plants with thin film solar cells. Their stock prices were $300 in May and are currently just over $100.
JA Solar Holdings Ltd.
(NASDAQ: JASO) is a Chinese monocrystaline solar cell manufacturer that distributes its product through China, South Korea, the US, Germany, Sweden, and Spain. Its stock dropped from $27 this spring to less than $3. Stocks declined by 29% yesterday alone.
SunPower Corporation
(NASDAQ: SPWRA) is a manufacturer of solar cells, solar panels, and roof tiles. Stock prices reached as high as $130 at the beginning of the year and are currently around $25.
Suntech Power
(NYSE:STP) is the world’s largest producer of solar panels and has four manufacturing centers in China. Stock prices reached $90 in January and are now around $10.
Yingli Solar
(NASDAQ:YGE) is based in China and manufactures solar ingots, cells and modules. Stock prices were as high as $40 in January, 2008 and now hover around $4.
Why are solar stocks dropping in value?
Falling Value of the Euro
Germany and Spain are two of the leading global markets for solar energy, and the European solar market grew by 87% to 2157 MW in 2007. Germany has a very strong feed-in tariff program from the government. Spain enjoys ideal weather for solar energy combined with strong government incentives. Europe is a very important market to the solar industry.
“Just recently the euro depreciated dramatically, more than 23%. So we have to adjust our ASP (average selling price) to support our customers,” Yang said.
Lehman Brothers Bankruptcy
To top it off, JA Solar, SunPower and Evergreen Solar among other companies saw losses because of their ties to the defunct Lehman Brothers (NYSE:LEH), where they were involved in convertible bond transactions and stock lending agreements.
“We estimate JASO would realize ~4% dilution on stock and incur a non-cash write off of $7M for the book value of the capped call, and also write off a $100M investment in a LEH vehicle,” said Jeff Pichel, an analyst for Piper Jafrray.
Regarding Evergreen Solar, Pichel said, “ESLR worse case scenario – lose the $39.5M premium if the capped call transaction with Lehman is not replaced, as well as dilute share count by 30M (~25%) without getting anything in return for the dilution.”
Sales Forecasts Decline for Some
Many solar manufacturers ramped up production as demand climbed. A global slowdown caused some companies to reduce production.
“At this moment the market reaction has been panic,” said Samuel Yang, Chief Executive Officer of JA Solar.
Due to the economic conditions, sales forecasts have dropped significantly for some solar companies. This is rare for the solar market, which has seen unprecedented growth in recent years.
JA Solar reduced its 2008 revenue forecast to between $849.5 to $878.9 million from the $1.05 to $1.17 billion it had forecast in October, and said its earnings per share would be near break-even. They also cut the 2009 revenue forecast to $1.5 billion to $1.7 billion, which were previously $2.0 billion to $2.2 billion.
Fourth quarter growth margins would drop to a mere 5% to 7%, according to JA Solar, from 23.3% in the second quarter and 21.6% in the third quarter.
SunPower, however, reported strong quarterly earnings in October and even raised the 2008 profit forecast slightly. Net income rose to $22.4 million, or $ .26 per share, from $8.4 million, or $ .10 cents per share, a year ago.
What Does the Future Hold For Solar?
On the Bright Side
The US solar market is likely to have more government support under Obama compared to Bush. He has set a goal to generate 25% of the US energy from renewables by 2025. This is a big goal considering that currently less than 10% is from renewables, including hydroelectric power. Also, the renewable energy tax credits that were set to expire were extended and in some cases expanded.
On the Downside
Solar development that depends on financing may see hurdles under the current credit crunch. The price of certain fossil fuels such as oil and natural gas have recently declined, which may make it more difficult to obtain financing in the short-term. Hopefully, price drops won’t take attention off of the finite quantity of fossil fuels that is dwindling as we speak.
Photo Credit: Kiril Lozanov of Solar Service Inc. of Niles, IL (upper photo)
While the price of crude has a big effect on alternative energy stocks, the whole market is going through a tough time. Spring of 2009 will bring the support of the new president and higher crude prices so as we are testing the bottom of the market again this is the time for the average investor to take a position. If you don’t know what companies to buy stay with the best of breed solar stock, First Solar [ticker FSLR] or just use the most popular ETF, ticker TAN.
http://thealternativeenergyinvestor.blogspot.com
This is not surprising at all. Home solar installations will suffer with the drop in home values. People aren’t taking equity out to improve their homes because the equity is being siphoned off in the housing crash. Also the economy is hurting and loans are harder to come by so industrial instalations are hurting.
Who knows how much Obama is going to be able to get done. Or even how hard he is willing to fight for it. This is another issue. Clean coal is another pink elephant for Obama, he’s mentioned it in speeches before and who knows how much money he is planning to invest in false clean energy.
I’ve been hearing that in general stocks tend to sink shortly after Democrats are elected, but I do believe the future of solar is a “when” not an “if.”
We’re having an estimate done in a few weeks, and will try to find a way to get panels up for water/heating in 09. It’s odd that I keep hearing that financing is dried up, but Chase (who now owns our WAMU-originated mortgage) sends us home equity loan letters almost weekly.
So somebody out there wants to make a loan, and I’d have to think solar installations look like a better bet for a bank holding a mortgage than relatively-useless granite fixtures for a kitchen.
But what Obama actually does moving forward is certainly critically important.
Has nothing to do with Obama.
The simple answer is similiar in nature to the price of oil. Artificial bubbleness. In the case of oil, it was largely the hedgefunds speculation and selling back and forth that pushed up the price.
In the case of solar, waaaaayyyy overbought at the beginning of the year and at the time it was a trend. I couldn’t believe the absurd values being placed on the solar stocks.
With the crash of the overall economy, fuel to the inevitable fire was set in motion. The big money (hedge and mutual funds) cut and run.
That’s the problem now. The big money is on the sidelines leaving the playing field in disarray because of the lack of volume to stabilize it.
Like I said, this is the simple answer.
Hopefully O doesn’t stick it to the corpos. Not now. That would present a problem imho.
BTW, I really enjoy your website. I’m a project manager for a construction company in the Portland OR metro area and we do a small (and getting larger) percentage of LEED projects. I’m excited about the evolution of solar, wind, and fuel technologies.
To echo previous comments, the price of oil is having ripple effects in the green energy market, and what was once perceived as cost effective has lost its luster.
What we need is the resolve of those in government to realize that this is but a temporary reprieve, and that we need to dampen the shock of the next rise by moving forward with the installation of as much alternative infrastructure as possible.
[...] been quite a year for the cleantech industry, with roller-coaster oil and stock prices, multiyear federal tax credits finally passed after more than a year of narrowly failed attempts, [...]