Solar stocks have been on a tear this week after "upbeat" earnings reports out of some Chinese manufacturers. Yingli Green Energy (NYSE: YGE), JA Solar (NASDAQ: JASO), Trina Solar (NYSE: TSL), and LDK Solar (NYSE: LDK) all jumped midweek after companies reported strong demand in China and other emerging markets.
So what should we read into solar's latest earnings reports? Let's look at the numbers.
China reports third-quarter numbers
I've compiled all of the most important numbers from Yingli, JA Solar, and ReneSola (SOL +0.00%), which reported this morning.
| Company |
Q3 Revenue |
Q/Q Rev Growth |
Gross Margin |
Net Income |
Earnings Per Share |
|---|---|---|---|---|---|
|
Yingli |
$355.9 Million |
(27.9%) |
(22.7%) |
($152.6 Million) |
($0.98) |
|
JA Solar |
$260.9 Million |
(9.2%) |
(5.9%) |
($59.1 Million) |
($0.30) |
|
ReneSola |
$218.2 Million |
(6.4%) |
(18%) |
($78.6 Million) |
($0.91) |
Source: Company press releases.
You have to wonder why stocks jumped after numbers like this. Compared with a 12.4% gross margin at SunPower (SPWR +0.00%) and 28.5% at First Solar (FSLR 0.13%) these are absolutely terrible numbers. Combine that with the fact that terrible balance sheets only get worse with huge losses, and the third quarter's numbers only support my position that the Chinese solar industry is effectively bankrupt.
SolarCity set to join the market
Solar installer SolarCity has been talking about going public for a long time, but it finally looks imminent. The company gave a price range of $13 to $15 for a $151 million IPO this week, and we're expecting the company to start trading before the end of the year.
I went into a deeper look at the company earlier this week and gave you three reasons to buy and three reasons to sell the stock when it begins trading. I'll take a cautious approach at the open, but I'm encouraged by the long-term commitment from insiders, and the installation market continues to grow at a rapid rate. This could be a big winner for long-term solar investors if the current trends continue.
A new report on solar
Lawrence Berkley National Laboratory released a new report on the solar industry from 1998 to 2011 this week (see more here). Some of the information is dated, since prices and some other components move quickly, but it does give us a chance to look at how far the industry has come. Here are a few interesting notes from the report.
- According to the report's data sample, in 1998, the U.S. installed 0.2 megawatts of solar power. That number grew to 1275 MW in 2011, nearly as much as we installed in the previous 13 years combined.
- For systems under 10 kW, Texas had the lowest cost per watt at $4.90 and Washington, D.C., was highest at $7.60. For systems in excess of 100 MW, Pennsylvania led the way with costs of $4.50 per watt, and Arizona was most expensive at $6.20 per watt.
- The total cost of a residential or commercial PV system has fallen from just under $12 per watt in 1998 to $6.10 per watt in 2011. It's also important to note that the rate of decline is also accelerating since 2009.
- Costs are falling in the U.S., but we have a long way to go. The U.S. average installed price for a 2-5 kilowatt PV system is $6 per watt compared to $3.40/watt in Germany, $4/watt in Australiia, and $4.50 per watt in Italy.
If you love these kind of stats, check out my previous article "Solar Stats That Will Blow Your Mind."
Foolish bottom line
Week after week, data is released that shows solar continues to become more cost-effective and installations are growing in sustainable markets like the United States. But that doesn't mean that all solar companies are worth investing in, as you can see based on the results from the Chinese manufacturers I've looked at today. One company that's worth considering is First Solar, one of the few companies in the industry that's still profitable.
