Solar stocks outperformed the broader market by a solid margin this week.
Their growth was driven by two key events. SunPower turned in killer results, and the Chinese government rolled out a big solar subsidy program.
SunPower proved the doubters wrong by turning in $298 million of revenue versus expectations of $263 million. On its earnings call, the CEO and CFO of the company sounded like they were gloating as they went over results.
One of the biggest concerns we’d read from FBR Capital was that SunPower was losing share in California. Well, SunPower let the world know that it was wrong, showing that its market share was strong in California, and it would continue to get stronger.
FBR seemed to get the message. It raised its price target on the stock from $22 to $40. Now FBR thinks the premium brand will win out in the “distributed generation” market. That is, the market for rooftop solar panels, as opposed to big ground mounted projects that First Solar (FSLR) specialises in.
SunPower’s great earnings drove its stock 29% higher on Friday after it reported. As for the Chinese solar stocks like Yingli (YGE), Candian Solar (CSIQ) and others; they were boosted by a Chinese solar subsidy that is expected to increase solar power in the country by 500 MW in the coming years.
Investors immediately got excited and goosed Chinese solar stocks. The excitement could be overblown, though. The added installations in China are not that drastic. Most analysts didn’t see much in the way of material impact coming from the subsidy.
Of course, those are the same analysts that totally missed SunPower’s blow out quarter. So take what they say with a grain of salt.
Next week we get to see what First Solar did for the second quarter. Analysts will probably underestimate the company, they almost always do. But now that SunPower has reported a great quarter, investors and analysts might be on their toes.
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