Associated Press, HOUSTON — Jefferies & Co. lowered its ratings on eight solar companies Friday, citing numerous risks that could play out in the coming months, including a continuation of falling prices.
In reports to clients, Jefferies noted that a continued downward spiral in pricing, while accompanied by lower production costs, may lead to weaker-than-expected estimates for 2010 and concerns about value destruction in the solar sector.
“Liberal Chinese lending practices encourage overproduction and capacity expansions in a market that needs rationalization, in our view,” Jefferies analyst Paul Clegg said.
Evergreen Solar Inc. (ESLR) was downgraded to “Underperform” from “Buy.” Jefferies also lowered its price target to $1 from $3. Jefferies said Evergreen’s low silicon usage advantage has been obscured by high manufacturing costs and pricey silicon contracts.
First Solar Inc. (FSLR) was downgraded to “Hold” from “Buy.” Jefferies also lowered its price target to $130 from $200. It noted, however, that it expects First Solar’s cost structure to remain the lowest in the industry even if silicon prices continue to decline.
Solarfun Power Holdings Co. (SOLF), was downgraded to “Underperform” from “Hold” and the price target was cut to $4 from $6.
Energy Conversion Devices Inc. (ENER) was downgraded to “Underperform” from “Hold” and the firm set a price target of $8. Jefferies noted Energy Conversion has a unique product and market niche, but analysts remain concerned about weak demand.
Ascent Solar Technologies Inc. was downgraded to “Underperform” from “Hold.” Jefferies’ said its $4 price target reflects increased investor risk tolerance.
China Sunenergy Co. Ltd. was downgraded to “Underperform” from “Hold” and trimmed its price target to $3.50 from $4. “Despite strong cell technology and a stable liquidity position, we believe CSUN’s strategic position in only one segment of the value chain could become a more notable disadvantage in an increasingly competitive environment,” Jefferies noted.
SunPower Corp. was downgraded to “Hold” from “Buy” and its price target was lowered to $30 from $35. Jefferies said SunPower’s diverse and flexible business model bodes well for its market-share prospects in a recovery.
Suntech Power Holdings was downgraded to “Underperform” from “Hold” and its price target was trimmed to $12 from $14. “STP is positioned to generate rapid growth in key (markets) and to remain a leader on cost and quality,” Jefferies said.
In another report, Jefferies maintained its “Buy” rating on MEMC Electronic Materials. The company’s “very strong balance sheet” positions it well “as a survivor and potential consolidator,” analysts said.
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