Published on November 13th, 2008 | by Sarah Lozanova11
Solar Stocks Plummet Despite Obama Victory
November 13th, 2008 by Sarah Lozanova
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?
(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.
(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.
(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.
(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.
(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.
(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.
(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?
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)
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