It's been a tough year in the solar market, and inverter manufacturers seem to be hit particularly hard. Satcon Technology
Satcon didn't help the cause yesterday when it lowered revenue and margin guidance for the second quarter. The company hasn't hit expectations in each of the last four quarters and now an expected profit in the second quarter has turned to a sizable loss.
Solar companies like LDK Solar
We'll get plenty of comments on what the second half of 2011 looks like when manufacturers start reporting earnings in a few weeks. That's when we should get an idea if we're headed into a bull market for the sector or more pain ahead.
Solar vs. inverters
The problem for Satcon in particular versus its solar counterparts is the company's lack of profitability in a market full of profitable companies. Many solar manufacturers trade well below 10 P/E multiples (even Power-One is trading at just 7.7 times 2011's earnings estimates). Now that Satcon has lowered estimates, it looks like an even worse deal versus competitors.
In the inverter space Power-One is a much better buy -- and with fewer competitors than in solar power, this is a smart way to play the growing solar market.
Fool contributor Travis Hoium owns shares of LDK Solar and has sold puts in LDK Solar. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool owns shares of Power-One. 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.