Will JA Solar Fall Behind Trina Solar and Canadian Solar?

JA Solar (NASDAQ: JASO) will release its quarterly report on Tuesday, and investors have continued to be bullish about the prospects for the Chinese solar company in recent months as industry conditions keep improving. With solid results from Trina Solar (NYSE: TSL) and Canadian Solar (CSIQ 0.60%) recently, JA Solar hopes that its earnings can keep up and maintain the upward swing that has boosted interest in solar stocks once again.

As recently as earlier this year, Chinese solar stocks looked like they all might get massacred en masse, as the threat of trade restrictions and overcapacity weighed heavily on the debt-ridden sector. But JA Solar stood out from the crowd during the spring, as it avoided the fate of competitors like Suntech by actually paying off a convertible-note issue in May. Since then, JA Solar has faced challenges, but it's making the most of fundamental strength that's emerging within the industry. Let's take an early look at what's been happening with JA Solar over the past quarter and what we're likely to see in its report.

Stats on JA Solar

Source: Yahoo! Finance

When will JA Solar finally make money?
In recent months, analysts have gotten more optimistic about JA Solar earnings, narrowing their third-quarter-loss estimates by 40% and the full-year 2014 projections by more than half. The stock has also performed well, rising 32% since late August.

JA Solar actually came into the quarter on a weak note, with second-quarter earnings disappointing investors with a 5.5% sequential drop in revenue and weak gross margins leading to another net loss for the solar company. Even more discouraging was the fact that JA Solar didn't follow Trina Solar's lead in boosting solar-module production guidance, suggesting that JA Solar might be trailing its peers in taking advantage of better conditions.

But JA Solar has done its best to bring in new projects to boost its volume. In late August, the company said it would develop three solar projects in China's Hebei province, with approval to start the first 50-megawatt phase of one of the projects and with expectations that the total volume will add up to 300 megawatts. Further announcements of new projects in China, Israel, and the U.K. show continued interest and have helped bolster JA Solar's shares.

One big question is whether JA Solar can play a bigger role in the rising trend toward residential installations. Canadian Solar has emphasized the importance of residential solar by launching a residential-financing program last month. Collaborating with Boston's Admirals Bank, Canadian Solar will let customers borrow as much as $40,000 toward a residential-solar installation in order to boost demand for its own modules. Breaking into the market could give JA Solar a similar bump in sales, especially with solar securitization starting to take shape in the financial marketplace.

In the JA Solar earnings report, watch to see to what extent the company has managed to penetrate the lucrative Japanese solar market. Canadian Solar has done a good job selling panels to Japan, although Trina hasn't tapped the potential there to nearly the same extent. Essentially, JA Solar needs to pull out all the stops and find every opportunity it can to grow in higher-margin markets.

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