It's not easy being green on Wall Street these days. Shares of solar energy companies have lost nearly half their value this year on investor concerns that a U.S. recession and falling oil prices will hamper demand for renewable energy sources. Fears that greater supplies of solar cells and panels will drive down prices -- and the sector's lofty margins -- have also weighed on the stocks.
By Nichola Groom
LOS ANGELES (Reuters) - It's not easy being green on Wall Street these days.
Shares of solar energy companies have lost nearly half their value this year on investor concerns that a U.S. recession and falling oil prices will hamper demand for renewable energy sources. Fears that greater supplies of solar cells and panels will drive down prices -- and the sector's lofty margins -- have also weighed on the stocks.
The aggressive sell-off of one of last year's hottest sectors has analysts asking whether it has finally hit bottom.
!ADVERTISEMENT!Many have advised clients to snap up battered shares of companies including SunPower Corp and First Solar Inc, while others said valuations on some solar stocks are still too high. All agree the industry's long-term fundamentals are strong, and many hope SunPower's fourth-quarter earnings report on Thursday will give the sector a much-needed jolt.
"The past three weeks have seen arguably the most severe correction ever for U.S.-traded solar stocks," Raymond James analyst Pavel Molchanov said in a note to clients on Tuesday. "While we clearly do not rule out the possibility of further volatility, we would encourage investors to think long-term, ride out the current storm, and use this as an opportunity to accumulate shares."
On Wednesday, Molchanov upgraded SunPower shares to "strong buy" from "outperform," but the stock slid as much as $12.86, or 16.5 percent, to $65.06 on the Nasdaq. Shares of the San Jose, California-based cell and panel maker have lost about 48 percent this year after soaring 250 percent in 2007.
Though falling oil prices have not directly affected demand for solar panels and other alternative ways of generating electricity, easing crude prices have sparked concerns about overall interest in renewable energy sources, analysts said.
"Oil is going down, and why would anybody care about alternative energy ever again?" said Pacific Growth Equities analyst Michael Horwitz. "(But) that's missing the point of some far grander trends that are in place," he added, citing climate change concerns and U.S. dependence on foreign oil.
The massive sell-off in the broader stock market, sparked by concerns about a U.S. recession, have also weighed on fast-growing solar companies.
"We have a recession unfolding, and what are companies going to do -- will their attention be diverted to more pressing issues like keeping their order books filled and will clean energy be pushed to the back burner for a quarter or two?" said Signal Hill analyst Michael Carboy.
"That's a legitimate concern, but we are getting down to valuations that make solar stocks very appealing," he added.
Nevertheless, Carboy said First Solar shares were still too expensive to recommend, adding that he preferred SunPower.
First Solar's stock was down $25.08, or 14 percent, at $157.71 on Wednesday. Shares of the company, which makes thin-film solar panels that use less silicon than traditional panels, have lost about 44 percent this year, but still trade at about 90 times analysts' average 2008 earnings estimate. That compares with a multiple of 37 for SunPower.
Wedbush Morgan analyst Al Kaschalk, who initiated coverage of First Solar on Wednesday with a "hold" rating, also recommended avoiding investing in the Phoenix-based company for now. He also gave Evergreen Solar Inc a "hold" rating, saying investors should seek "a more attractive entry point."
Evergreen shares have dropped nearly 39 percent this year. The stock was down 5.9 percent at $10.59 on Wednesday.
Also on Wednesday, shares of Suntech Power Holdings Co Ltd were down $7.33, or 13 percent, at $49.02, Yingli Green Energy Holding Co Ltd's stock was down $2.83, or 11 percent, at $23, and shares of JA Solar Holdings Co Ltd were down $3.99, or 6.6 percent, at $56.43.
(Editing by Braden Reddall)
