Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Yingli Green Energy (NYSE:YGE) jumped as much as 56% in early trading after the company released better-than-expected first-quarter guidance. Shares settled down to a 17% gain as the day went on, but the jump pulled Suntech Power (NASDAQOTH:STPFQ), LDK Solar (NASDAQOTH:LDKYQ), and Renesola (NYSE:SOL) more than 10% higher as well.
So what: Yingli said first-quarter shipments declined 6% to 7% versus an earlier expectation of a low- to mid-teen percentage drop. Gross margin is expected to be 4% to 4.2%, about in line with expectations.
Adding fuel to the fire was a report by Lux Research that predicted the solar industry's supply glut will be gone by 2015.
Now what: Let's put everything into a little perspective here. Yingli is still losing money, and Suntech and LDK are both effectively insolvent. None of these companies is predicting a profit any time soon, and even if they do increase margins, they have to pay for billions of dollars of debt.
I'm not suggesting that Chinese solar stocks won't rise, only that operations aren't improving as fast as stocks are right now. Some of these companies may survive, but they all won't, and that's where the risk is for investors, which keeps me out of guessing which Chinese solar stock will be the fad of the day.
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