Stocks in solar companies have taken a bit of a beating over the past couple of weeks. First Solar (FSLR -1.39%) shares are down almost 7%, while shares of SolarCity (SCTY.DL), SunPower (SPWR -3.09%), and GT Advanced Technologies (NASDAQ: GTAT) down between 10% and 16% since the 21st. The thing is, all four are well up since the beginning of the year, with SunPower and SolarCity both up well over 300% and First Solar and GT up 59% and 128% respectively.

So the question is, will the future look more like the returns we've seen since the beginning of the year, or the past couple of weeks? Let's take a look.

Taking profits?
SunPower's earnings report yesterday was pretty strong, with nearly across-the-board improvements in the company's results. The company increased gross margins by 35%, and also cut operating expenses by 7%, leading to $108.4 in net income, after losing more than $48 million in the year-ago quarter. Additionally, management raised guidance for the fourth quarter. But next year is another story, and this could be at the center of SunPower's sell-off. CEO Thomas Werner, from the earnings call:

As a reminder, back in May, at our Analyst Day, we expected our full year 2013 non-GAAP earnings to be in the range of $0.60 to $0.80. And now, we are expecting earnings to be between $1.30 and $1.50 per share, which reflects the solid execution of our model ... For 2014, we will lay the groundwork that will allow us to rapidly expand our infrastructure and manufacturing scale in 2015, while delivering strong bottom line performance next year. For 2014, we see non-GAAP earnings per share per quarter in the range of $0.15 to $0.35, with full year earnings of at least $1 per share.

The company is making it clear that the cost of growth will impact earnings next year, and that's clearly leading some investors to take money off the table.

First Solar's profits have recovered from a very ugly 2012, and shares are up more than double in the past year. But for long-term investors who bought a few years ago, it's still a long way back to the nearly $200 stock price of 2009, and with quarterly and YTD sales declining for the past two quarters even as profits are up, it's easy to understand why investors are selling off in fear. First Solar reports after market close today.

Even massive growth and diversification won't stop some selling
SolarCity announced a couple of weeks ago that it would deploy nearly double the amount of power generation capacity in 2014 that it would deploy in all of 2013. And since the company sells excess power not used by its customers, this is a massive source of future income. And while shares moved up more than 25% within a few days on that news, the market has coughed up about half of those gains since. And with earnings set for November 6, there's a good chance shares may fall further in the next few market days. 

GT Advanced Technologies has been attempting to diversify away from reliance on its core polysilicon and photovoltaic business, focusing heavily on its sapphire product for consumer electronics. With the expansion of LED for lighting and other purposes, management is convinced that this business will be, as CEO Tom Gutierrez stated in the second quarter earnings release, "the key driver" for future growth. GT reports earnings on November 4. 

Final thoughts
Toss in rumors of oil prices falling, and earnings season getting into full swing, and there are a lot of things moving the market in solar right now -- especially after so many companies have performed exceptionally well this year. However, the key to successful investing is to look past the dips, and distractions of the market, at the long-term potential.

Source: IEA

From IEA Executive Director Maria van der Hoeven:

  • Electricity generation from hydropower, wind, solar and other renewable sources is projected to scale up by 40% in the next five years.
  • By 2016 global renewable electricity generation will overtake that of gas, and represent twice as much as nuclear.
  • And by 2018 the share of renewable electricity will account for a quarter of the global power mix, up from 20% in 2011.

Simply put, renewables like solar are only going to continue to grow more critical to our energy future. Are you invested accordingly?