At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.
But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
And speaking of the best …
Is solar so-over? After hearing First Solar's
The Teutonic megabanker rode to the industry's rescue with an armful of upgrades yesterday. Arguing that their "low-cost structure and increasing brand recognition" will make "Chinese solar PV module manufacturers … the major beneficiaries of the global demand growth in 2010E," Deutsche upgraded many of the biggest names in Chinese solar.
Trina Solar
Not quite
Earlier this week we discussed the prospects for solar within the context of First Solar's many downgrades. Summarized, we're looking at a likely 5% drop in average selling prices this year, on top of the 8% to 10% drop that solar modules have already experienced. While not disputing the risks, Deutsche argues that because they benefit from such dirt-cheap costs, "Chinese manufacturers [can] … weather a likely ASP decline and capture more market share."
The question investors need to ask themselves, though, is whether owning a bigger piece of an unprofitable market is really a good thing. After all, it's not like Deutsche has such a great record in solar to date. While it's scored impressive victories on several past solar picks …
Companies |
Deutsche Says |
CAPS Says |
Deutsche's Picks Beating S&P By |
---|---|---|---|
First Solar |
Outperform |
** |
101 points |
SunPower |
Outperform |
*** |
21 points (two picks) |
Suntech |
Underperform |
**** |
33 points |
… it goofed in recommending wafer-maker MEMC Electronic
Granted, Deutsche could be proven right this time. A lot of solar stocks have taken tumbles in recent weeks, and they could be due for a bounce if, for example, bearish investors cash in their winnings by buying back sold-short shares. But long-term, this industry still suffers from the same devilish details I highlighted when criticizing Yingli, Trina, and Suntech back in November:
- Endless cash-incineration
- Incessant rounds of share dilution
- Generally unsound economics, relative to the cost of traditional energy suppliers
Foolish takeaway
Apparently, Deutsche Bank believes all this adds up to a bull case for buying these stocks.