Trina Solar Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Barely two weeks after a big rally fueled by an analyst upgrade, shares of Trina Solar (NYSE: TSL  ) fell more than 11% when peer First Solar (Nasdaq: FSLR  ) updated 2011 guidance and offered weak 2012 guidance.

So what: Investors fear that what's bad for one is bad for the other. They may be right. As my Foolish colleague Travis Hoium reported in October, burgeoning efficiency in solar module manufacturing is creating a supply glut, which in turns crimps sales and profits.

Now what: If history holds, we'll have to wait till February to get a fuller report on how Trina is navigating the delicate dance between progress and profits. What do you expect? Would you buy shares of Trina Solar at current prices? Let us know what you think using the comments box below.

Interested in more information about Trina Solar? Add it to your watchlist by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 15, 2011, at 5:49 PM, IBJAMMIN wrote:

    ASPs are falling because the cost of a solar panel's main raw material, poly-silicon, has fallen dramatically. If costs go down, because cheaper supplies and greater plant efficiencies, margins won't be squeezed by lower ASPs as much as most analysts predict. A supply glut leads to lower selling prices. Lower prices increase sales, not the other way around as the author stated. Millions of home and business owners have been waiting for solar prices to come down. Well, they have, and they may get even lower, thus making the potential solar market even larger. Difficult financing of projects may be the biggest obstacle to sales now.

    Do not forget than Japan, still stunned by the Fukushima disaster, has vowed to replace half of their electric energy supply with renewable sources by 2020. That will mean a lot of the glut will be absorbed there. In addition, Germany still plans to phase out the rest of it's nuclear reactor fleet in the next decade. They also plan to replace that supply with renewable energy sources.

    The USA still has it's 30% tax credit in place for solar energy expenditures. The credit is good for a few more years too. With today’s reduced prices on panels, they are finally cost effective. In states with an additional tax credit, the pay back period is less than 10 years. The expected usable life of a system is 25 years. That gives you 15+ years of free energy!

    BTW, First Solar won't benefit from lower poly-silicon prices since it's not used in making their thin film collectors. Their former advantage is gone.

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