Solarfun shares fall on expected 2009 price drop

Shares fell $2.61, or 14 percent, to $16.33.

Lazard Capital Markets analyst Sanjay Shrestha is maintaining a "Hold" rating on the stock, saying it is fairly valued at current levels considering the near-term uncertainty surrounding polysilicon sourcing and margin performance.

"We believe that management is taking the necessary steps to position the company for longer-term success through capacity ramp, silicon sourcing, and focus on technological enhancements to reduce cost," Shrestha wrote in a client note. "However, the company still lacks scale compared with other larger players."

Solarfun on Wednesday reported earnings of $11.4 million, or 23 cents per share, for the second quarter of 2007, nearly tripling from the year-ago period and beating the average expectations of analysts surveyed by Thomson Reuters by a penny per share. The company increased revenue during the quarter by 12.7 percent to $197.1 million.

But Solarfun said it expects average selling prices, which have been strong so far this year, to decline 5 percent to 10 percent from expected fiscal 2008 prices.

Its average selling price during the second quarter of 2008 improved to $4.17 per watt from $4.07 per watt in the first quarter, the company said.

Citing strong demand, Solarfun raised its guidance for 2008 shipments to a range of 175 megawatts to 190 megawatts, up from a previous estimate of 160 megawatts to 180 megawatts. It expects total shipments for 2009 to come in about 50 percent higher than its revised 2008 estimate.

"Although near-term supply constraints and higher costs persist, we see visibility for better conditions beginning in the fourth quarter of this year and further improvements throughout 2009," Harold Hoskens, Solarfun's chief executive, said in a statement.