Three Plays on Solar Strength This Summer

Tag : Solars Panel

What’s the story lately with alternative energy stocks inthis ragged market? Is big growth making this group a good optionfor diversification these days? Zacks senior analyst Jon Kolb was on-hand to let us know.
Ahead of second-quarter earnings season, what sorts of alternativeenergy stocks would you recommend?
Just a couple weeks back I initiated coverage on ReneSola, Ltd. ( SOL ) as a Buy. The China-based company, incorporated in March 2006, isengaged in the manufacture and sale of solar wafers and relatedproducts. In April 2006, the company discontinued the sale of solarmodules and concentrated on the production and sale of solarwafers.
Are you positive on the company mostly because you see strength inthe solar energy industry?
Through its short history, ReneSola regularly adapted to changingmarket dynamics. The company is aggressively ramping up itspolysilicon and solar wafer production capacities.
Going forward, increased captive generation of polysilicon willimprove its cost structure and enable wafer capacity expansions.Globally, rising solar wafer sales, along with escalating crude andlong-term supply agreements, should collectively generatesignificant earnings growth. That said, SOL is a play on growth inthe solar industry. ReneSola’s customers include globalmanufacturers of solar cells and modules, such as JA Solar ( JASO ) , Motech Industries, Solarfun Power ( SOLF ) , Suntech Power ( STP ) and Topco Technologies.
Can you tell us about another solar panel company that you havecovered a longer time?
Well, First Solar ( FSLR ) was upgraded to a Buy recommendation back in mid-April. And as Isaid in my latest research report, FSLR’s recent bullishnessis buoyed due to the steep rise in the price of oil.
Earlier, after climbing as high as $280.91 a share in December2007, FSLR plummeted to a low of $165.60 in February 2008.Subsequent to that, FSLR recovered greatly and is currently tradingnear its yearly high.
Sounds like these shares might be mighty risky.
FSLR’s reliance on low cost thin-film cells helped thecompany avert a silicon shortage which ravaged the bottom lines ofother solar peers. As a result, the company was able to registerconsistent improvement in its bottom line in stark contrast to itssilicon cell peers.
Accordingly, we maintain our Buy recommendation on FSLR with asix-month target price of $333. Price appreciation to our near-termvaluation target represents 15.6% upside potential.
What would you call your biggest success story among your solarindustry coverage this year?
We first put a Buy on Energy Conversion Devices ( ENER ) back when it was trading around $30 per share. Of course, this wasbefore the latest “oil-shock,” or whatever one wants tocall it.
Energy Conversion’s operating segment, United Solar Ovonics,has a total annual production capacity of 118MW [megawatts].Ongoing expansion plans will increase United Solar’smanufacturing capacity to 178MW by the first half of 2009 and toover 300MW per annum by the end of fiscal 2010.
You don’t worry that the share price will level-offsignificantly?
We remain optimistic about the company’s long-term potentialsuccess in the high growth alternative energy industry, givenincreased activity in solar power projects, and progress towardsustainable profitability in ENER’s current fiscal year 2008.
Any final words on this sector at this time?
The investment outlook for the alternative energy industry isbullish, with significant growth potential over the next 5-10years. As with any burgeoning industry segment, there will likelycontinue to be rapid changes within individual names as newtechnologies continue to evolve, although the longer-term trend isfavorable for diversified long-term investors.
Those investors seeking to capitalize on the on-going efforts toreduce both domestic and global dependence upon the dominant oiland natural gas producing regions of the globe may wish to focus onemerging and established firms engaged in wind power,solar/photovoltaic, solar thermal, geo-thermal, hydro, marine andbiomass-based energy sources. Dozens of such companies exist withinthe US and many more internationally, ranging from micro-capventures to large-cap multinationals.
Jon Kolb is a senior analyst covering the alternative energy andutilities industries for Zacks Equity Research.