Solar Stocks After Earnings: Suntech Up, ReneSola Down

by: Stephanie Grimmett August 21, 2008 | about stocks: SOL / STP    

Stephanie Grimmett

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ReneSola (SOL) falls on good news, and when it finally reacts positively to incredible quarterly earnings, the stock starts selling off within an hour.

Want a more logical solar cell stock? Check out Suntech Holdings (STP). Suntech is a Chinese solar cell company that just announced great second quarter earnings (see conference call transcript). They’re not as good as ReneSola’s, which nearly tripled its earnings for the quarter, but Suntech did see a 57.9% rise in profits year over year. And it beat analysts’ estimates by nearly 30%.

Even better, Suntech’s factories are contracted to capacity for the production of solar cells through the rest of 2008, and possibly all of 2009 (The company isn’t saying, "yes" or "no" to that one, but it has hinted that it’s not seeing any problems getting customers for the next year and a half.).

STP was up 12% on the news.

Disclosure: none

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This article has 9 comments:

  •  
    Aug 21 06:48 AM
    SOL did go up yesterday. Tuesday, the day SOL reported, was a down day for the market. In fact the market started out down considerably. Growth stocks tend, especially recent IPOs, tend to go down fairly dramatically in a down market. That day the overall market news was bad. Since then Credit Suisse has kept its outperform rating on SOL, and it has raised its one year target price to $29 from $25. Piper Jaffray has kept its buy rating, and it has reiterated its one year target price on SOL of $35. There are only 4 analysts covering SOL. This means the new average target price is $29.50. I have not seen comments from the other analysts yet. However, they may yet raise their estimates. SOL had no bad news, only good news. Its margins were in line with comparable companies in its industry. It has secured its polysilicone for this year at reasonable rates already. It is not like TSL hemming and hawing about what the margins may be for the rest of the year. Oh yeah, it more than tripled it earnings from the year ago quarter ($.12 to $.38). It also beat estimates by a good margin (not as much as STP). It guided a good amount higher on revenue for the rest of the year (13% on average). This is likely to lead to a very near term pop of 13% or more in the stock price, especially with more good earnings from SOLF coming up next week. SOL's EPS were $.38. STP's EPS were $.38 (GAAP). SOL's stock price closed at $19.11 Wednesday (PE = 18.49). STP's stock price closed at $41.75 (PE = 31.78). Analysts' average ratings are SOL = 1.8, and STP = 1.8 (a tie). The growth through 2009 is also predicted to be about the same for the two. It looks to me like SOL is the better bargain at the moment. STP is definitely more followed though. In this kind of market, I think it makes sense to pay a fair amount of attention to value, not just the market "emotions" about a particular stock. We keep getting downturns. When the next one hits, which stock do you think will go down the biggest percentage? I think SOL looks pretty strong with its PE after Q3 earnings going down to approx. 12.7. I don't think STP will be anywhere near this. What makes it better. You can lose more money with it?
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  •  
    Aug 21 06:54 AM
    Actually on a downturn, they might both go down about the same percentage. However, it is much more likely that SOL will regain its losses more quickly because it is a much better value for the money. After another downturn, investors will be taking an even stronger look at value. They will be looking for solid bargains, not so much emotionally well like stocks.
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  •  
    Aug 21 07:32 AM
    I think you should change the title of this blog. SOL's earnings were not down! They more than tripled, and they beat estimates by a fair margin.
    Reply | Link to Comment
  •  
    Aug 21 08:47 AM
    Also STP is a little more on the retail end of the solar manufacturing business. Most people seem to think that this is the area that will get squeezed first when prices eventually start to come down. This seems like another reason to chose SOL over STP as a longer term investment.
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  •  
    Aug 21 09:53 AM
    David you have it wrong. STP is the big fish in the supply chain. Suppliers have benefited solely upon the fact that silicon has been hard to come by and the prices have remained high. Silicon prices are expected to come down significantly and what you don't know is that STP has a game changing technology called Pluto which can convert low grade silicon to higher grade silicon of which will further reduce their costs and drastically improve GM's. When silicon is abundant in 2009 Renesola will have to scramle to keep its GM's up for the big fish in the market place will be able to negotiate even better terms than currently exist. Don't get me wrong Renesola will have significant growth in 2009 but without question they will see their GM's drastically reduced from their current levels and that will put pressure on the stock for the silicon business IMHO will be more commoditized than the PV business and in the end it will be the end product manaufacturer who will be the big winner. This is the reason why the large PV manufacturers will have the upper hand in 2009 and 2010 and why STP is in a much better market position with already having contracted for 900MW of silicon for 2009.
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  •  
    Aug 21 09:56 AM
    I checked one further item. The recent short percentage for STP was about 14% of the float. It was about 6% for SOL. When the stock gives out good news (and a stock is heavily shorted), the stock tends to rise more quickly than a stock which is not heavily shorted.

    Of course, once this rally is over, the people who originally shorted STP will likely again begin shorting it from a higher price basis. This will drive the price of the stock down more quickly. You might want to factor this into your thinking too.
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  •  
    Aug 21 09:57 AM
    SOL has appreciated quite nicely over the last few weeks. There was a sell-off on the news immediately after the earnings release, but it has since gained back all it lost and looks poised to go even higher. You don't provide any compelling reasons to choose STP over SOL other than what happened to each stock the day after earnings. I'm not sure what your motive is here. Maybe you could provide a full disclosure???
    Reply | Link to Comment
  •  
    Aug 21 03:25 PM
    I am holding SOL, TSL and CSIQ, CSUN, and ASTI. Also SPIR.

    I believe most of those are undervalue especially STP telling everyone 2009 will not be oversupply at all.
    Reply | Link to Comment
  •  
    Aug 21 03:25 PM
    That also confirmed on the CSIQ CC.
    Reply | Link to Comment
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