FBR remains a staunch bear when it comes to the solar industry. And today, it’s business as usual as the firm reiterates its thesis that the supply of solar systems will grow much faster than demand in CY09, leading to Average Selling Price and margin pressures that have yet to be “fully” dialed into solar stocks.
FBR sees more than the anticipated downside risk for SunPower (SPWR) in Spain:
Solaria (the largest Spanish system installer/developer) reported yesterday a 45% QOQ decline in megawatt (MW) shipments in 2Q, some of which was driven by 50MW of cancellations. Since we expect 30%-plus of SPWR’s revenue mix in CY08 to be driven by Spain, and since Spain is expected to slow down dramatically in CY09, unless other geographies pick up significantly, we see Solaria’s news as another indictor of downside risk to CY09 expectations for SPWR.
And First Solar’s (FSLR) largest market, Germany (91% of revenue in 2007), isn’t looking as profitable as it used to–unless you’re Applied Materials (AMAT):
According to Colexon Energy (one of the leading solar system developers/installers in Germany), Moser Baer (one of AMAT’s largest [thin-film solar cell] customers) will start by mid CY09 to supply Colexon with a total of 120MW of [thin-film] systems. This, combined with the market shift from large (1MW-plus) to small (< 1MW) projects in Germany starting in CY09, in our view, causes more downside risk for FSLR due to increased competition.
FBR expects the Valencia, Spain PV trade show, starting on Monday, to provide a short-term boost for solar names, but encourages profit-taking on FSLR and SPWR due to the risks mentioned above. FBR regards the Colexon news as positive for AMAT, however.