Clouds on Horizon for Solar Stocks?
First Solar could be sign of things to come.
Solar stocks have been doing well, thanks to the high expectations for green investing set by the new administration. Even though the market declined about 7% in the last few days, stocks like First Solar (FSLR) continued to do well.
Today's decline in First Solar comes courtesy of Citigroup, which downgraded the company on valuation, inventory and margin concerns.
As I have openly shared with Minyans, I pay more attention to the reaction to the news than the news itself.
Here's what the FSLR chart looks like:
Click to enlarge
At $140.5, First Solar is precariously perched on the 21-day moving average (and mid-Bollinger Band, not shown here), having broken through the 10-day moving average. The stock also broke support at $147. The next logical support seems to be the 50-day moving average, at $132.
From a fundamental perspective, raw silicon-wafer prices have been in freefall, thanks to weakness and a large buildup of capacity in the semiconductor industry. Note the continued reduction in revenue outlook at companies like MEMC (WFR), which supplies silicon wafers to the semiconductor and solar industries.
The consequential decline in ASPs for solar modules from competitors who use significant amounts of silicon in their solutions will also pressure First Solar as price competition gets more pronounced. Besides, with governments around the world battling deficits and needing to prop up their financial systems and bail out the corporate sector, subsidies for solar power (at a time when crude prices have collapsed) will rank low on the priority list, further impacting the growth in demand solar companies were counting on.
The boost from US government investments will definitely be needed in order to provide a more stable outlook for these companies. So, while the sun might not be setting on solar stocks, there seem to be some clouds appearing on the chart.
Click to enlarge
Actionable ideas, instant analysis. Real-time from bell to bell.
Minyanville's Buzz & Banter- 14-day Free Trial
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter