UPDATE: Street Dims Solar Outlook As Obama Era Nears
17 January 2009 - 8:23AM
Dow Jones News
By Steve Gelsi
NEW YORK (Dow Jones) -- Wall Street has tempered its outlook on
the solar panel business, even as the alternative energy sector
looks toward a boost from the incoming Obama administration.
While Obama pledges to promote green-collar jobs under his
economic stimulus package, the near-term outlook for solar panel
manufacturers remains cloudy in the face of tight credit, less
money available for subsidies overseas and other challenges.
The plus and minus of the business drew ratings changes by at
least three Wall Street research firms this week.
Cowen & Co. lowered its estimates across the solar-stock
universe, including sector leader First Solar (FSLR), the largest
U.S. solar panel maker by market cap.
While Cowen sees a 50% upside to First Solar share price
performance verses the broad market in the next 12 months, lower
shipments and revenue are in store for the company, Cowen
noted.
While the industry is hoping for help from an Obama stimulus
bill, questions remain over whether it'll provide enough of a lift
in the short term.
Solar analyst John Hardy for Broadpoint.AmTech downgraded giant
solar panel maker Suntech Power Holdings (STP) to neutral.
While shares of the company have doubled from November lows, the
company faces a "difficult solar earnings season defined by limited
visibility into the first half of 2009," Hardy said in a note to
clients.
Looking ahead, Hardy said he'd be willing to assign a sell
rating on the stock, "if demand continues to deteriorate to the
point where we do not believe the company can service its debt
obligations through cash flow from operations."
While most analysts remain bearish for the first half of the
year, some are tweaking their forecasts based on better conditions
closer to 2010.
Lazard Capital Markets analyst Sanjay Shrestha said limited
access to capital has caused issuers throughout the solar value
chain to decrease or cancel capacity-expansion plans globally, but
prospects may soon brighten.
Shrestha upgraded shares of Suntech (STP) to buy from hold and
LDK Solar (LDK) to hold from sell.
"We believe shares of Suntech are pricing in the challenging
fourth quarter and first half of 2009," Shrestha said. "The
company's long-term pricing and procurement leverage should result
in gradual margin expansion by the second quarter with meaningful
improvement in the second half."
Despite wild swings in stock prices and a short-term slowdown in
the business, venture capitalist Maurice Gunderson, senior partner
at CMEA Ventures of San Francisco, maintains that the fundamentals
of the solar energy business point to rapid growth.
He warned that big changes under the Obama administration will
take time, even as optimism in the alternative energy sector
continues to build.
"It's so incredibly refreshing to have someone who actually
picks scientists to be in his administration and shows signs of
actually listening to them," Gunderson said. "I've been in the
energy sector for 35 years, and the problem we've faced is that
it's easy to dream up new products to save energy, but oil and gas
and electricity are just way too cheap. That situation is changing,
and the Obama administration is showing all kinds of signs that
they understand the problems and will act on them. It's
wonderful."
Gunderson acknowledged that Obama has already drawn jests from
mavens in the oil and gas sector who dismiss his likely energy
policy as unicorns on treadmills.
"Expectations may be too high in the short term because we want
quick fixes to big problems," he said. "The problem took 100 years
to create. It's not going to be fixed in six months by anybody. I
see this as a five or ten year fix."
CMEA Ventures continues to invest in solar energy as it
approaches price parity with coal in electricity production, he
said.
President-elect Barack Obama on Friday is scheduled to visit
wind turbine component manufacturer Cardinal Fastener &
Specialty Co. in Bedford Heights, Ohio, as he travels from Illinois
to Washington for his inauguration.
Obama has called for a doubling of renewable energy production
within three years to drive the economic recovery.
Obama's nominee for energy secretary, Steven Chu, boasts a
résumé that includes not only a 1997 Nobel Prize for physics, but a
record of solar, wind and ethanol support.
In his confirmation hearing this week, Chu voiced support both
for domestic nuclear power and oil and gas drilling, as well as
solar plants and a "smart grid" to bring more wind power to
market.
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