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Chinese Solar Stocks Jump Again

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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: Chinese solar stocks are jumping again today on speculation that easy money from China will have no end. Canadian Solar (NASDAQ: CSIQ  ) was up over 12% early in the day while LDK Solar (NASDAQOTH: LDKYQ  ) and Yingli Green Energy (NYSE: YGE  ) were up as much as 11% and 14% respectively.

So what: Bloomberg News posted an article late yesterday that said China is likely to encourage domestic demand as a way to get the solar industry back to profitability. Case in point is reports that Yingli could win 3 GW of solar projects outside of Qujing in China.  

Nomura analysts also gave reason for some to buy, remaining bullish on Canadian Solar and predicting positive earnings before interest and taxes, or EBIT, in the second quarter.  

Now what: Chinese solar stocks can swing 10% any day with little significant news, just like they're doing today. What investors need to keep in mind is that more subsidies don't necessarily mean that Chinese solar manufacturers are good investments. Canadian Solar is one of the best Chinese solar companies, and it still has $1.7 billion in debt hanging over it. Even if subsidies do continue and EBIT does turn positive, the company is a long way from net income and would have needed $14.6 million in EBIT just to cover interest expenses last quarter. As for LDK Solar and Yingli, their balance sheets are a nightmare, and they'll be two of the last Chinese solar companies to generate net income, if they ever do. I'm still staying away from these volatile stocks and sticking with steadier U.S. ones, which don't need easy money from state-run banks just to stay alive.

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Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 17, 2013, at 9:23 PM, camarodan64 wrote:

    USA solar makers are supported by USA tariffs , and tax advantages ,with out this the USA solar makers would have all went bankrupt. The Chinese increased capacity because they saw European solar makers achieving 100% margin on solar panel sales, then the poly silicon shortage happen, then the financial crisis of 2008-2012 in Europe almost killed the whole solar sector back then, but now its different we have Japan, China, USA,Canada and well the whole world basically installing solar at a booming pace, soon the Usa will cry for Chinese panels and solar goods. check out solarcellstocks dot com.

  • Report this Comment On June 18, 2013, at 2:53 PM, Foolsspin wrote:

    So What: Another dumb piece of nothing written again from Motley

    NOW THIS: Nomura is the only analyst I pay attention to.

    JA Solar is the most undervalued and the price target from Nomura is $9.60

    YGE starting to look much better with the 3GW Project they'll be doing in China over the next 4 years.

    NOW THIS: Start posting something to readers instead of your manipulative garbage

    FACT: Motley writes for Hedge funds that want to discourage FACTS while they scoop these stocks up at historical lows..

  • Report this Comment On June 18, 2013, at 3:20 PM, Lexloeb wrote:

    all of this solar, ok most of it, is misallocated capital. our passive solar system did not outlast it's predicted pay back period . I am very skeptical. Most of what Chinese companies and other hope to reap is misallocated government directives. I can see a city like Phoenix being a solar powerhouse with all roof tops doing solar work. the more it rains the more potential damage there is over time. Phoenix is pretty safe but right now these government tax credits are making a bad deal too sweet. If the Chinese companies are successful and all this junk on roof tops just turns into total trash they way much of it will then having a cost of removal that is higher than the tax credit benefit ever was then the Chinese are just on the government dole. worry about natural gas and even coal....coal is now almost a giveaway.

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Related Tickers

9/30/2016 4:00 PM
CSIQ $13.74 Down -0.38 -2.69%
Canadian Solar CAPS Rating: **
LDKYQ $0.02 Down +0.00 +0.00%
LDK Solar Co., Ltd… CAPS Rating: *
YGE $3.87 Up +0.03 +0.78%
Yingli Green Energ… CAPS Rating: *