Wall Street's Throwing Solar Out With the Bathwater

I'm almost at a loss for words regarding solar stocks lately. We've seen quarter after quarter of improved fundamentals with company after company posting results that not only beat expectations but blew them out of the water. And still solar stocks continue to fall.

Our latest victim is Trina Solar (NYSE: TSL  ) , which finally reported earnings and didn't disappoint, crushing estimates from Wall Street analysts. As you might expect, the stock was beaten down today by 5%. So were any of our normal red flags triggered by today's announcement?

  • Beat analyst revenue expectations? $508 million vs. $421 million. Check
  • Beat analyst EPS expectations? $1.08 vs. $0.87. Check
  • Raised guidance? Capacity guidance up to 1GW from 900-930 MW. Check

We got everything investors normally want to see from an earnings announcement and yet the stock was thrown out with the bathwater. I would say we could attribute the drubbing to unease in the eurozone, but Trina is down more than competitors such as JA Solar (Nasdaq: JASO  ) , Solarfun (Nasdaq: SOLF  ) , or First Solar (Nasdaq: FSLR  ) , which all have a major presence in Europe.

Outlook for 2011 was even solid despite Wall Street's insistence on questioning demand. Trina said demand is greater than planned capacity for 2011, but apparently investors don't believe that.

Watching costs
Trina is kind enough to break out cost per watt, something I watch closely in the sector for changes in competitive position. After seeing costs rise at Solarfun in the third quarter it was good to see Trina Solar costs fall $0.02 to $1.08 per watt. This is the lowest I've seen reported from c-Si manufacturers and is edging closer to First Solar's $0.77 per watt.

Despite investor reaction I saw a lot of good news from Trina Solar's third quarter. Sure, gross margin declined a little sequentially, but it is still above 30% and significantly better than this time last year. Further, costs are falling and outlook for 2011 remains strong. I can't really ask for more than that.

Interested in reading more about Trina Solar? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

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Fool contributor Travis Hoium owns shares of First Solar. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

First Solar is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (8)

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 December 01, 2010, at 12:23 PM, wyrdmage wrote:

    Buyaluminum: "Mirrors...feel so warm that most advanced photovoltaic modules cannot match by a long shot."

    Mirrors are effective in a limited way; photovoltaic tech provides electricity that can be used for, well, just about anything electric (providing more energy than can be stored). When mirrors can provide energy for multiple uses more cheaply than photovoltaics, then the business world will thin their skulls.

  • Report this Comment On December 01, 2010, at 9:03 PM, sailrick wrote:

    To get an even better idea how good Trina is looking, I suggest today's article at Seeking Alpha, titled

    Trina Solar Reaches New Milestones in Q3 2010

    The author has done a really good analysis of Trina's earnings report and guidance.

    Buyaluminum probably invests in buggy whips. Ignore him.

  • Report this Comment On December 01, 2010, at 9:16 PM, nhawk53 wrote:

    Geothermal energy makes sense now with oil prices rising. Calpine(CPN) is a great buy right now.

  • Report this Comment On December 02, 2010, at 3:23 PM, DBerriman wrote:

    They want you to buy the stocks that they've run up 300%-500%, while tiring out and selling the solars (if you haven't already), which have all been beaten mercilessly, despite having posted, arguably, the best earnings as a sector in the entire market.

    This is Wall Street, folks. And the good guys on WS (what few there are) get lumped in with the rest. That's how it is. If you want that to change, folks (good guys on WS), blow the whistle on what they (the manipulators..the bad guys) do.

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