The solar market is oversupplied, and will remain that way for the next year says Hapoalim Securities’ solar analyst Gordon Johnson in an interview with Barron’s.
By his calculations, demand for photovoltaic solar will be 4.5 gigawatts this year, while supply will be 7.1 gigawatts. Next year demand will rise to 6 gigawatts, while supply will rise to 10.8 gigawatts. His supply figures exclude thin film makers like First Solar (FSLR). Add them, and it’s even uglier.
This oversupply will have a bruising effect on the whole industry. Johnson says polysilicon plants must run at 70% capacity to break even. So, expect the rough times to continue for the solar industry. Here’s how he sees it on a per company basis:
First Solar (FSLR): He says the stock is overpriced, providing “a great entry point for short sellers.” The thin film company’s margins are going to be under pressure because of falling polysilicon prices.The stock shot up recently on the news of a deal with China. That news was overhyped. It was a memorandum of understanding with a Chinese province that hinges upon government support. Says Johnson, “It’s the equivalent of me signing a deal with a city in Indiana and making it seem that I have an agreement with the U.S. government.”
SunPower (SPWRA): SunPower surprised most people on the street last quarter, but Johnson thinks the company is overrated. SunPower has a higher cost than rivals, and slightly better quality. Rivals are starting to catch up though.
Suntech (STP): The company is locked into contracts to buy polysilicon at prices that are well above the market prices now. Suntech has a lot of debt at a high interest rate, and its manufacturing process is not as efficient as its rivals.
Trina (TSL) and Yingli (YGE): He likes both of these companies, and has been saying so for a while. Trina has worked through its inventory, and Yingli has decent margins. Though, with Yingli there remains some risk.
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