The thin tightrope solar companies are walking led two companies in opposite directions yesterday. Trina Solar
JA Solar shipped a record 463 megawatts in the fourth quarter and revenue jumped 137% from last year to $584.3 million. Earnings per ADS were $0.59, beating estimates of $0.48, but that hasn't been the focus for investors. The focus is gross margins, which were 19.2%, down from 33.5% last quarter, a bad sign in a strong quarter for solar sales. Trina Solar reported much higher 31.4% gross margin, but the difference has an easy explanation.
It appears that the big difference between JA Solar's and Trina Solar's results was the company's sales of modules on contract. JA Solar ended last quarter with much of its capacity under contract and was not able to take advantage of market prices, which according to Trina's results rose in the quarter. That doesn't make one right or wrong. It just explains the difference.
If you prefer to sleep at night knowing your company has contracts and prepayments for its products, JA Solar is the way to go. It already has 90% of its capacity under contract for 2011.
JA Solar is also trading at a bargain-basement price of $7.45 per share, 4.6 times 2010 earnings, so there is lots of upside for investors willing to jump in.
As competitors such as LDK Solar