First Solar Soars, House Passes No More Solyndras Act

September 15, 2012 by  
Filed under Solar Energy Tips

Solar energy stocks jumped Friday, led by First Solar (FSLR) up nearly 8% in the afternoon as the market continued rallying on the heels of the Fed’s Thursday announcement of a stimulus package for the economy.

Energy stocks were broadly up as oil hit $100 a barrel for the first time in four months on the Fed’s QE3 moves.

In the latest solar industry news, House Republicans passed a bill Friday that would phase out federal loan guarantees like the $535 million given to the now-bankrupt solar firm Solyndra, the Associated Press reported.

If the bill becomes law, it may help First Solar and other established solar firms avoid having to compete against startups, enabling existing firms to boost profit margins.

First Solar, the only name in IBD’s 23-company Energy-Solar industry group with market capitalization above $1 billion, was one of the top 10 percentage gainers on the Nasdaq as of 1 p.m. Eastern.

The largest U.S. solar company, First Solar makes thin-film solar modules and has been successful in pushing manufacturing costs down. Startups, including Solyndra, have used thin-film approaches too.

The “No More Solyndras Act,” however, is seen as having little chance of passing in the Democrat-led Senate, AP said in its report.

Thin-film modules are an alternative approach to the standard photovoltaic, or PV, solar modules used by most of the solar industry. PV makers have been pushing costs of production lower too, but the whole industry has been beset by supply/demand and pricing woes in recent years. Europe’s debt crisis weighed heavily on it amid incentive cuts in key European markets.

“A recent bounce in PV stocks has likely been driven by news of strong U.S. installations (and an EU trade case against China aided U.S. names),” Cowen Co. analyst Robert Stone said in a midweek research note. However, he says, average selling prices keep falling “and U.S. growth will slow from 2013 as Treasury Grant and utility projects roll off.”

Stone sees China likely set to win the race for cost and scale but with shares hampered by debt and margin pressures until winners emerge.

Sunpower (SPWR) “looks best positioned for eventual U.S. residential grid parity,” Stone noted, referring to the point at which solar energy costs the same as conventional energy sources. He says First Solar “likely faces severe competitive pressure as project backlog declines,” and has a neutral rating on the solar stocks group.

Zacks Equity Research noted on Wednesday that the macroeconomic environment doesn’t bode well for a solar industry that thrives mainly on subsidies and grants.

Suntech Power Holdings (STP) shares were up nearly 4% in the afternoon, Sunpower more than 3%, LDK Solar (LDK) nearly 2% and GT Advanced Technology (GTAT) 1%. Yingli Green Energy (YGE) shares traded flat and Trina Solar (TSL) fell nearly 2%.

The solar group, ranked a low No. 167 in performance among 197 that IBD tracks, is up 12% this month while First Solar has gained 21%. Year to date, though, they’re down 18% and 28% respectively.

Elsewhere in the energy sector, Exxon Mobil (XOM) hit a new high. It and Apple (AAPL) are now the two largest U.S. companies by market value, Reuters noted. Apple also hit a new high Friday following the overnight sales launch of the iPhone 5.

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