By
Travis Hoium
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February 17, 2012
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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: For the second time this month, solar suppliers have shot higher in a broad solar market rally. Today, Hanwah SolarOne (Nasdaq: HSOL ) , JA Solar (Nasdaq: JASO ) , ReneSola (NYSE: SOL ) , and JinkoSolar (NYSE: JKS ) have all topped the 10% mark as investors anticipate strong earnings results. LDK Solar (NYSE: LDK ) has lagged slightly, climbing only 8%.
So what: Signs are starting to emerge from reported financials that solar suppliers will have better earnings than they previously forecast. SunPower and Suntech both reported fourth-quarter numbers that were higher than their own expectations and the hope is that this success will trickle down to solar suppliers.
Now what: My concern here is that too much recovery has been baked into these stocks. Suntech only increased its shipment forecast by about 10% and still said shipments would decline quarter over quarter. That doesn't exactly indicate that top-tier manufacturers will run through their own polysilicon, wafer, and cell supply, pushing demand down to companies like JA Solar, Renesola, and LDK Solar.
Results may in fact be better than the third quarter for these companies, but I still think they're in a tough strategic position when compared to top-tier suppliers. I would wait until earnings for each of these companies come out before buying in. That will tell us a lot more about their condition than news from other industry participants.
Interested in more info on these solar stocks? Add them to your watchlist by clicking on the links below.
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