Solar stocks have had a rough week with most stocks falling sharply in trading. This comes despite the industry reporting incredibly good initial first quarter numbers and signs that 2014 will be off the charts.
While stocks are down this week, it's important to take a step back and look at what's really going on in the industry. Here are the biggest takeaways from this week in solar.
The big picture
We're starting to get data from the first quarter in solar and the numbers look very good. Solarbuzz is estimating that 9 GW of solar was installed in Q1 and 50 GW will be installed this year. That's up 35% from a year ago, which should mean supply and demand will come back into balance and top-level suppliers can run factories at full steam.
Yingli Green Energy (NYSE: YGE ) reinforced that notion this week when it said first-quarter margins will be higher than expected because of rising module prices. GTM Research is seeing similar trends, even predicting this week that Chinese solar module prices may rise 20% in 2014. That includes potential tariffs, but it's also a sign that demand is picking up and the balance of power is shifting over toward manufacturers.
SunPower (NASDAQ: SPWR ) will be the first to report earnings on April 24 and it'll be key to watch what it says about prices and demand. SunPower makes the highest efficiency panels in the industry but they're also some of the most expensive. If Chinese manufacturers can command higher prices, as Yingli has indicated, then we should see SunPower's margins rise as well, which would be a bellwether for all solar manufacturers.
But rising panel prices isn't good for everyone. While SunPower will be a bellwether for manufacturers, SolarCity (NASDAQ: SCTY ) can tell us what they're seeing from the installer side. Module costs are a significant input into SolarCity's value model and they may be hurt more than others if costs rise because of higher demand or tariffs on Chinese manufacturing. I know they're looking outside China for supply, but this is a global solar market so if prices rise for Chinese panels they'll likely rise for everyone else as well.
News and notes
The data out of the industry was positive this week and we also had a number of very important announcements from solar companies.
- Trina Solar (NYSE: TSL ) announced a new high-efficiency Honey Ultra module. The module will be built with monocrystalline cells with efficiency of 24.4%.
- SunEdison (NYSE: SUNE ) announced that it closed a $150 million nonrecourse construction facility as part of $300 million in financing from Deutsche Bank Securities. Financing is key to solar companies building projects, and for SunEdison this will give short-term financing until projects are completed and sold or pushed down to a YieldCo.
- Meritage Homes announced this week that it's giving away a SunPower solar system for new homes in California. The offer is for a relatively small 1.4 kW solar system but it can be upgraded to a larger system through loan or lease deals, which is probably what SunPower is really looking for. The takeaway is that Meritage is seeing solar as a differentiator, something I think more homebuilders will see long term.
- RGS Energy announced that it was selected to build 6.7 MW of solar capacity at 22 sites in the Stockton Unified School District in California. The systems will be built on carport around the school district and will allow students to monitor performance online in real time.
That's all for this week in solar but check back to fool.com for more solar coverage.
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