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Wall Street's Throwing Solar Out With the Bathwater

By Travis Hoium – Updated Apr 6, 2017 at 10:09AM

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Wall Street is giving up on solar, pushing Trina Solar down 5% today after a great earnings report.

I'm almost at a loss for words regarding solar stocks lately. We've seen quarter after quarter of improved fundamentals with company after company posting results that not only beat expectations but blew them out of the water. And still solar stocks continue to fall.

Our latest victim is Trina Solar (NYSE: TSL), which finally reported earnings and didn't disappoint, crushing estimates from Wall Street analysts. As you might expect, the stock was beaten down today by 5%. So were any of our normal red flags triggered by today's announcement?

  • Beat analyst revenue expectations? $508 million vs. $421 million. Check
  • Beat analyst EPS expectations? $1.08 vs. $0.87. Check
  • Raised guidance? Capacity guidance up to 1GW from 900-930 MW. Check

We got everything investors normally want to see from an earnings announcement and yet the stock was thrown out with the bathwater. I would say we could attribute the drubbing to unease in the eurozone, but Trina is down more than competitors such as JA Solar (Nasdaq: JASO), Solarfun (Nasdaq: SOLF), or First Solar (Nasdaq: FSLR), which all have a major presence in Europe.

Outlook for 2011 was even solid despite Wall Street's insistence on questioning demand. Trina said demand is greater than planned capacity for 2011, but apparently investors don't believe that.

Watching costs
Trina is kind enough to break out cost per watt, something I watch closely in the sector for changes in competitive position. After seeing costs rise at Solarfun in the third quarter it was good to see Trina Solar costs fall $0.02 to $1.08 per watt. This is the lowest I've seen reported from c-Si manufacturers and is edging closer to First Solar's $0.77 per watt.

Despite investor reaction I saw a lot of good news from Trina Solar's third quarter. Sure, gross margin declined a little sequentially, but it is still above 30% and significantly better than this time last year. Further, costs are falling and outlook for 2011 remains strong. I can't really ask for more than that.

Interested in reading more about Trina Solar? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

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Fool contributor Travis Hoium owns shares of First Solar. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

First Solar is a Motley Fool Rule Breakers recommendation. 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.

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