Why Yingli Green Energy Pulled Solar Stocks Higher

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: Shares of Yingli Green Energy (NYSE: YGE  ) jumped as much as 56% in early trading after the company released better-than-expected first-quarter guidance. Shares settled down to a 17% gain as the day went on, but the jump pulled Suntech Power (NASDAQOTH: STPFQ  ) , LDK Solar (NASDAQOTH: LDKSY  ) , and Renesola (NYSE: SOL  ) more than 10% higher as well.

So what: Yingli said first-quarter shipments declined 6% to 7% versus an earlier expectation of a low- to mid-teen percentage drop. Gross margin is expected to be 4% to 4.2%, about in line with expectations.  

Adding fuel to the fire was a report by Lux Research that predicted the solar industry's supply glut will be gone by 2015.  

Now what: Let's put everything into a little perspective here. Yingli is still losing money, and Suntech and LDK are both effectively insolvent. None of these companies is predicting a profit any time soon, and even if they do increase margins, they have to pay for billions of dollars of debt.

I'm not suggesting that Chinese solar stocks won't rise, only that operations aren't improving as fast as stocks are right now. Some of these companies may survive, but they all won't, and that's where the risk is for investors, which keeps me out of guessing which Chinese solar stock will be the fad of the day.

Interested in more info on Yingli Green Energy? Add it to your watchlist by clicking here.


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  • Report this Comment On May 21, 2013, at 9:25 PM, davibroc wrote:

    Time will prove you wrong. I am an American living in China and Chinese has plenty of pride and cash to keep all these companies alive. And if they are doing it, is certainly not because they like to throw money off the window, they do it for a reason. They know this is a long term opportunity for them not just in the Chinese market. Look at their investment in Africa, in the future energy will be scarce, and solar will be a viable way to produce it.You guys and seeking alpha are making a killing shorting it now, but that only give us people like me and the Chinese to buy these stocks at a lower price and invest for the future. So please continue to post article like this.

  • Report this Comment On May 25, 2013, at 5:11 PM, sonofTesla wrote:

    I have to agree with the comment above. The fact that the Chinese govt. is STILL giving money to a few solar manufacturers means they know they will get paid back on it by drumming up domestic demand as well as moving into emerging markets like Africa and Saudi Arabia...EU tariffs or not, the Chinese solar industry is far from dead as the articles author would have you believe. The Chinese put these wheels in motion long ago. They know how strategic this industry is and certainly aren't dumb enough to let it fail. Like the previous comment, I'm glad Travis continues to bash Chinese solar...It continues to give wise investors (like myself) ample time to buy these stocks at depressed pricing. Yingli and Trina aren't going anywhere but up.

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