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: Across the board solar stocks are up today, particularly beaten down Chinese stocks. JA Solar (NASDAQ: JASO ) is leading the way after reporting earnings and Hanwha SolarOne (NASDAQ: HQCL ) , Trina Solar (NYSE: TSL ) , ReneSola (NYSE: SOL ) , and JinkoSolar (NYSE: JKS ) have all jumped 10% or more.
So what: JA Solar was up a whopping 65% after reporting first-quarter revenue of $270 million and a net loss of $33.3 million, or $0.85 per share. Analysts were expecting $226 million in revenue and a $1.03 per share loss so the company easily cleared the bar Wall Street had set. Much more importantly, JA Solar paid off $119 million in convertible notes in May, something competitors Suntech and LDK Solar have failed to do. JA Solar has one of the best balance sheets in Chinese solar so it has a better chance than most to survive the eventual shakeout.
More importantly for the industry as a whole, Germany's vice-chancellor and economy minister said that anti-dumping duties on Chinese solar panels would be a "grave mistake". China has flooded the market with cheap panels sold at a loss and Europe is considering slapping a tariff on these panels the way the U.S. did last year. If China is able to avert such a tariff the industry would maintain a solid source of demand.
Now what: JA Solar's numbers are good and this is one of the better Chinese manufacturers but the across the board pop on solar stocks is overdone. Even JA Solar is expected to post losses for the next two years so it's hard to see what the value is in the stock. I'll keep an eye on China's top solar balance sheets like JA Solar and JinkoSolar but I'll stay cautious buying into an industry subsidized by the Chinese government with little regard for U.S. stakeholders (see STP and LDK's bond defaults).
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