Solar World: Mixed week for stocks

Solar stock prices gained more attention this week as some companies fell while others continued to rise in share price.

Phoenix, Ariz.-based First Solar on Monday announced five new sales agreements totaling $1.28 billion. By the end of the trading day, the stock price had reached as high as a 300 percent year-to-date gain, according to the Motley Fool, an investment newsletter.

"These contracts signal a major expansion into the solar market by leading energy firms with significant resources and capabilities and will accelerate the continuing evolution of the solar industry," Mike Ahearn, First Solar's chief executive officer, said in a statement.

"We now have an expanded group of highly capable market partners developing large ground and roof mounted projects throughout Europe under long-term agreements," Ahearn said.

The statement said First Solar will be setting up business in Ontario following the provincial government's decision to set up a feed-in tariff system that repays an electric company's solar customers for the extra energy they produce.

"Also included in the new sales contracts announced by First Solar is a multiyear agreement with SunEdison, LLC, a leading provider of solar generated electricity to commercial, municipal, and utility customers in North America. SunEdison will deploy First Solar modules in Ontario, Canada ... (we) look forward to working with them to implement solar projects in Ontario," Ahearn said.

Motley Fool writer Toby Shute, in an analysis of the stock price rise following the announcement, dubbed First solar "Icarus-like."

"In the early years, I won't argue with (the company's giant earnings projection) numbers," Shute wrote. "After all, first-quarter sales rose five-fold over those of the prior year, perhaps owing to some cosmic alignment with the Aztec Five Suns creation myth. That, or there's a ton of demand for thin-film solar modules. Believe what you wish."

Despite the cynicism, most experts agree there really will be "a ton of demand for thin-film solar modules" in the coming years. The solar market is already riding a wave of big-growth years, and governments around the world are following the leads of Germany, California and most recently, Ontario, and setting up feed-in tariff schemes. Thin-film is expected to do especially well, because its design relies less on high-priced and ingredients like silicon.

Shute said: "Given the fierce competition in the space, the company has little shot at raising its profit margins meaningfully over this period. That leaves just one way for First Solar to make these numbers: more than doubling sales year after year after year. Year five's sales projection of $14.5 billion is then roughly three times the present annual revenues of Peabody Energy, the largest public coal company. I just don't see that happening.

"For those of you who think you can keep flying closer to the sun without things ending badly, it might be time to brush up on your mythology."

Perhaps proving Shute's prediction, another rising star in the market, Hebei, China-based JA Solar faltered this week after a Needham & Co. analyst downgraded the solar cell maker from hold to buy. This despite the announcement Monday that JA Solar was opening four new production lines.

"The four new 25-megawatt-per-annum lines increase JA Solar's manufacturing capacity from 75 megawatts to 175 megawatts per annum," a statement from JA Solar said.

At the end of the day Wednesday, JA's stock, which trades on the NASDAQ, was down 5.68 percent.

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(Comments to energy@upi.com)