Lehman Recommends Pair Trades in Solar Stocks
In contrast to Merrill Lynch’s negative note on solar stocks today, Lehman Brothers analyst Vishal Shah says in his own note today that Germany’s tax burden as a result of subsidies for renewable energy is “not significant,” perhaps a fifth of a Euro per kilowatt hour per month on every bill, and of Germany’s total renewable energy burden, less than 20% is due to subsidies for solar, in particular.
Moreover, Shah estimates that if all existing supply of solar panels was sold into all subsidy markets in Europe, the total burden would come to about 7 to 9 billion Euros in 2010, up from perhaps 2.8 billion Euros this year. That’s not that much, he concludes, given rising fuel costs. As for politics in Germany, Shah thinks “the probability of a proposal being passed [regarding subsidy reductions] is very low […] as none of the two largest alliances have dominant power in the Parliament.” And things could well drag on into September, he argues.
But how to trade all that is more complex.
Shah recommends some pair trades, based on which solar manufacturers have exposure to different challenges in different markets. Thing is, for any one stock, you can find issues that don’t affect others, so it’s kind of, pick your flavor.
Suntech Power Holdings (STP), Canadian Solar (CSIQ), and Yingling Green Energy (YGE) are relatively more exposed to a slowdown in Spain than are Evergreen Solar (ESLR), First Solar (FSLR) and Energy Conversion Devices (ENER). But Suntech, Canadian, Yingling and LDK Solar (LDK) are relatively more exposed to high prices in polysilicon, versus Energy Conversion, First Solar and SunPower (SPWR). But The latter, and Akeena Solar (AKNS), are all more exposed to the US market, relatively speaking, and the risk of a cut in the US’s Investment Tax Credit [ITC] than are Canadian, Yingling, and LDK. Finally, Sunpower, First Solar, Suntech, JA Solar Holdings (JASO) and Yingling are of higher quality than Solarfun (SOLF), China Sunergy (CSUN), Canadian, and LDK, with “strong track records and good reputation among the investment community,” in Shah’s view.
Which factors matter most? You decide!
As I mentioned in the Merrill post, all the solar stocks traded down today, in several cases by 10% or more.
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This article has 10 comments:
- tessant
- 174 Comments
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May 29 10:05 PM-scott
solarfeeds
- Kevin O
- 4 Comments
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May 29 10:57 PM- Leofox
- 7 Comments
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May 29 11:49 PM- oguh
- 5 Comments
May 30 05:17 AMEvery compagnie has to reduce there CO2. To do that. Sunpower is the solution. If the compagnies produce to mutch CO2 they have to bye clean air emissions. This cost a lot of money. In Belgium is it so if i place solarpanels my electricwire is going down instat of going up and i get money for it. Think about that.
- oguh
- 5 Comments
May 30 06:43 AMI just received my newspaper.
The flamisch goverment (5.000.000 people)decided to gave higher premiums for sunpanels for small compagnies. For the period of januari-April 2008 small compagnies invested for 391,5 million Euro in renewed energysystems.
Belgium is one of the smallest countries in Europe.
Please, mister Heller, find anather job.
- SHABBAZZ
- 8 Comments
May 30 06:55 AMYGE + JASO are the two winner.
Good quality, a lot of cash, good margins.
I would like to see an article comparing the margins between all this players.
- stevepluvia
- 83 Comments
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May 30 09:25 AM***Bottom line: the subsidy was too high for product that at these prices is at grid parity with coal power.***
WHAT THE MARKET MISSED YESTERDAY -- THIN FILM PV IS AT GRID PARITY
Grid parity with coal power = installed cost below $3.50-3.75 -- this is possible with ASP below $2.20/watt. Every thin film mfgr will be selling below 2.20 in '09-'10.
Now is the time to LOAD UP on thin film, particularly CIGS companies. ASTI is the ONLY CIGS public play. Thin film profit margins will be 50-70% and sales will be max-plant-capacity for more than 7yrs.
Take advantage of the baby being thrown out with the bathwater; most on the street don't understand the difference between thin-film PV and c-SI -- take advantage of this opportunity while its available.
- buyforeclosures
- 108 Comments
May 30 09:08 PM- Agent Provocateur
- 1 Comment
Jun 10 10:57 AM- akapital9
- 67 Comments
Jul 02 05:59 AMSome speculate that illegal naked short selling is behind some of the manipulation of solar and alternative energy stocks by traditional brokerage houses and hedges...they're not quite embracing the future...and it's obvious why, they're deep in oil.
Everyone knows Subsidies are not what are currently driving the solar or alternative energy market right now. Certainly this was the case for many years but it is evident now that higher traditional energy is the prime mover. Thus, these observations are anachronistic.
Interest in alt energy is being driven by the prohibitive cost of oil and other traditional energies. In addition, alt energies are cleaner and have less geopolitical impact as well.
But traditional analysts and investors alike are slow to change...even worse, enemies to it...
The U.S. industrial complex is currently sending bodies to Iraq to fight for oil...is it so far fetched to think that it might be fudging markets in favor of big oil? Big oil is use to getting what it wants. In free market capitalism the stakes are high, very high...and when a whole way of life is threatened (big oil) success will not be left to chance. When the stakes are this high, there will be cheaters...
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