Solar Strategies in Industry Race

Brian Hicks

Written By Brian Hicks

Posted October 20, 2010

First Solar and SunPower Corp are in the driver’s seat in the rapidly growing U.S. solar power industry. This, along with the rising share prices of panel makers, has made consolidation in the market very relevant.

Thanks to supply and demand we are seeing competition increase and prices decrease. This entices the companies that produce these solar modules to find a way to stay ahead of the curve.

With big Chinese companies such as LDK Solar and Suntech Power cutting prices, solar panel companies are ringing in plant builders to keep demand stable.

For example, just last month Sharp Corp. paid a cool $305 million for developer Recurrent Energy and their 2 gigawatts project line.

As big-name solar developers following this trend, there are still a few independents that, given their projects hover around 20 megawatts while other big names are touching 300 megawatts, are easier to plan, permit and connect to the grid.

Independent companies such as Silverado Power LLC are holding off from potential suitors because they believe valuation will go higher.

Investors should keep an eye out on this sector before it climbs too high. We saw the WilderHill Clean Energy index, whose components include companies such as First Solar and Suntech, rise 16% since June. Clearly an indication of market interest…

Another way for companies to stay ahead is to buy companies that streamline installation processes or that make margin-boosting solar components… Companies like EnPhase Energy, which produce inverters that plug directly into solar panels rather than requiring a separate space – saving the need for extra cables, lowering installation costs and raising power output.

Savy investors should be eyeing a move in this sector as it holds a bright future.

Solar Stock Target Prices

Suntech (NYSE: STP)– Yesterday Raymond James and Deutsche Bank give positive reviews with a $13.80 per share price target

Candian Solar (NASDAQ: CSIQ)– Yesterday Deutsche Bank raises target price from $11 to $12

MEMC Electronic Materials Inc. (NYSE: WFR)– Yesterday Deutsche Bank downgraded stock to Hold from Buy and cut the target price from $18 to $15. “We expect solar PV module suppliers to generally report solid 3Q10 results and guide 4Q10 sequentially higher as anticipation of the next FIT rate cut keeps demand in excess of supply. The resulting firming of module average selling price (ASP) aided by appreciation in the Euro should lead top tiered vertically integrated suppliers to report stronger revenue growth and improving margins, and remain bullish through 1H11. However, we believe that the potential over supply following further cuts to FIT rates could moderate exuberance,” the firm stated. 

LDK Solar (NYSE: LDK)– upgraded from Buy to Neutral last week by UBS at $12 target, stock up %13.25.

SunPower Corp (NASDAQ: SPWRB)– Oxen Group has SunPower at Buy, target price $21.50

-Michael Boytano

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