With Obama winning in the polls, it is no wonder that on Tuesday solar stock prices soared: SunPower Corporation (NASDAQ: SPWRA) finished the day up 14.6%, Suntech Power (NYSE: STP) also closed 13.5% higher, Evergreen Solar (NASDAQ: ESLR) closed 12.8% higher, Canadian Solar (NASDAQ: CSIQ) was up 14.7% while Trina Solar (NYSE: TSL) gained 9.1%, First Solar (NASDAQ: FSLR) 9.6% and LDK Solar (NYSE: LDK) 4.8%. In fact, over the past week, these solar stocks added about 50% to their value: ESLR +104%, FSLR +55%, STP +53%, SPWRA +51%, LDK +48%, CSIQ +45% and TSL +41%. [Solar stocks are down this morning, seems to me a "sell on the news" decline.]
With these kind of gains recently you might think you're too late, but solar stocks have actually been beaten mercilessly in the past year. While the S&P 500 declined some 31% year-to-date and the Nasdaq declined 33%, solar stocks plunged even worse: STP -75%, TSL -73%, ESLR -69%, SPWRA -61%, CSIQ -56%, LDK -50% and FSLR -34%.
Congress passed a bill that approved about $18 billion of renewable-energy tax credits after repeated failed attempts to do so this year, and now there will be an administration that -- if it sticks to its claims -- will be more supportive of alternative energy. The only question investors should ask, so which do I pick?
Of course, the easiest thing to do is to buy the ETF: Claymore/MAC Global Solar Energy Index (NYSE: TAN) and it's a great option, but if you wanted to go with a pure-play, here are my two faves:
SunPower Corporation (NASDAQ: SPWRA) actually seems to be everybody's favorite. About three weeks ago, SunPower reported third-quarter financial results, posting triple the profit compared with the same period last year as sales surged 61%. SunPower continues to win contracts including one from Florida Power & Light Company to build the largest solar photovoltaic power plant in the United States. SunPower is also hailed as the most efficient of solar companies, as it claims its "high-efficiency solar cells and solar panels generate up to 50 percent more power than conventional solar technologies ..." With SPWRA traded at 12x forward earnings and a 41% long-term growth rate, you do the math.
[Update: SunPower said currency conversion will likely hurt fourth-quarter and fiscal 2009 earnings and the stock tanked 27% today. The new earnings and price level changed valuation levels and further evaluation is required, but as a long-term investment, the weakness might be a good time to get in. SunPower warning affected all solar stocks today.]
Suntech Power (NYSE: STP) I always liked because of its size. One problem within the solar industry is low barrier to entry, making STP's economies of scale its best competitive advantage. Suntech reported in August, a little before the real crisis hit stocks. STP posted a 58% rise in second quarter earnings and lifted its 2008 revenue target on strong demand for solar energy. So while you may discount this as being pre-crisis, it was only Sunday when Suntech said it aims to triple sales to the U.S. in 2009 as it announced expansion initiatives. Suntech constantly expands, takes part in initiatives and joint ventures. It just strives for more and seems to get it. Suntech is scheduled to announce third quarter results on Nov 20, and if past performance is any indication, it should continue to give solid numbers. With STP trading at less than 10x forward earnings and with an expected long-term growth rate of 40%, it seems rather cheap now.