With the upcoming solar trade show in Valencia, Spain (Sept. 1st-5th), FBR sees a catalyst for solar stocks. If the past is any indicator, stocks will climb in anticipation of the the trade show (as they are now) and sell off afterwards:
We note that, before the Munich show in April, solar stocks rallied 12%, followed by a more-than-12% sell-off; before the Munich show in June, they rallied 10%, followed by a 15% sell-off. And, prior to the intersolar trade show in San Francisco in July, solar stocks rallied 8%, followed by a 6% sell-off.
Are there other factors that could disrupt or amplify Valencia effect? Yes, the usual legislative headaches:
Following the recent 8% rally in our solar index, the key (obvious) question: will this rally falter (like the past three trade-show-related rallies) or be sustained? We note both the Spanish government (re. royal decree) and U.S. politicians (re. [investment tax credits]) will come back from the summer recess in September; these two groups of policy makers will determine the extent of the current rally….
Net: if the installation cap in Spain is kept at 300MW and if there is yet another failure to extend the ITC, we expect the current rally to quickly come to an end.
The logic makes sense. But here’s what WOULD extend the rally: Another spike in oil prices.
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