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Fear seemed to be the theme on the market for solar last week. First Solar (Nasdaq: FSLR ) reached a new 52-week low as investors tried to figure out what the company is going to look like in the future. Decent earnings from SunPower two weeks ago didn't seem to quell fears that manufacturers are going to have to continue battling each other for survival, and shares sold off as a result.
The bottom line is that the industry continues to post big losses across the board, something that can't continue forever. Below, I highlight three more money-losing companies that reported earnings last week.
Losses spill over to inverters
The results from the latest solar entrant into the public markets were mixed at best. Enphase (Nasdaq: ENPH ) said revenue grew 136% from last year to $42.6 million in the first quarter and gross margin jumped from 14.7% to 21.8%.
The problem is that revenue, gross margin, and shipments fell from the fourth quarter and the company reported a $10.2 million net loss. At this rate, there will need to be a big improvement in margins, which I don't see happening, or a jump in sales before we see a profit.
Power-One (Nasdaq: PWER ) is running into similar problems, watching growth and profits stagnate in the inverter market. Both companies are in an interesting position in the solar market and should see sales grow in the long term, I just don't see a reason to buy here when financial conditions appear to be getting worse instead of better.
Canadian Solar barely keeps its head above water
Rough conditions in the solar market are taking their toll on even the best manufacturers, as Canadian Solar (Nasdaq: CSIQ ) can attest. The company reported first-quarter earnings last week and they were about what we should expect from a Chinese manufacturer right now.
Shipments fell from 436 MW in the fourth quarter to 343 MW this quarter and revenue fell 31% to $325.8 million. Gross margin, the indicator I am watching closely at all manufacturers, slid a point to 7.7% and loss per share was $0.49.
The results look bad, but they're actually among the best in the solar industry, showing where manufacturers as a whole are right now. One trend I will point to as a strength is the company's ability to expand in the Americas as European demand falls. A year ago, 75.6% of modules were sold in Europe with the remainder split between the Americas and Asia. This quarter the Americas led the way with 45.1% of shipments and revenue grew quarter over quarter.
It's going to be a long slog forward, but I think Canadian Solar has a good chance to be one of the companies left standing when the solar shakeout is over.
The other end of the spectrum
Like I said, compared to other manufacturers, Canadian Solar's results are good, and ReneSola (NYSE: SOL ) is one of those weaker manufacturers. Last week the company said that revenue was up 12.7% from last quarter to $211.5 million, wafer shipments jumped more than 50% to 375.1 MW, and gross margin improved dramatically.
Despite the improvement, gross margin was still negative 3.8%, operating margin was negative 17.9%, and net loss was $40.2 million. As if losing this much money wasn't enough, management is going forward with module and polysilicon expansion plans, so it will be seen if the company can successfully pull off this expansion without sinking into more debt.
Management hopes to post positive gross margins in the second quarter, but that's about the only positive thing I can say about ReneSola right now. The company is sitting on more than $800 million of debt, can't make a profit on what it sells, and will continue to face fierce competition from stronger rivals. I don't see a reason to buy the stock right now.
Signs of the apocalypse
I'm getting tired of reporting on losses in the solar industry, but that's the world we live in right now. I'm afraid we'll see more of the same until more companies fail, supply is taken off the market, and markets like the U.S., China, and India become more mature.
I've made my bets in solar, but it's a dangerous world out there. Invest cautiously and wisely.
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