Vestas Trouble for Wind Energy Co. not Clouding Solar Energy Prospects - Analysis

After Devastating Year, Shares in Panel Makers Widely Up; Analyst Upgrades U.S. Leader

on January 12 2012 1:55 PM
Sun Being Eclipsed
Bad news for the wind energy industry are not necessarily translating into the same for solar panel makers Reuters

While reports that the world's largest wind turbine maker is firing thousands of workers globally shook the renewable energy industry Thursday, the bad news did not seem to diminish investor appetite in solar energy stocks, which has picked up considerably over the past week.

In fact, despite word that Vestas Wind Systems AS is laying off thousands, at least one Wall Street analyst is raising his outlook on the future of a much-battered industry behemoth, First Solar.

Ben Z. Rose, an analyst at Battle Road Research, released a note to clients today upgrading his investment recommendation for First Solar (NASDAQ:FSLR), from Sell to Hold. Rose had downgraded shares of the company from Hold to Sell on Aug. 22 of last year.

Rose highlighted how, in spite of a still-challenging industry environment -- which has included the loss of favorable subsidies in Europe, plummeting solar cell prices and sweetheart government financing Beijing extended to Chinese companies -- the bottom is basically in sight

We do think there's some stabilizing of prices. There does seem to be some relief in the horizon, Rose told the International Business Times.

Specifically for First Solar, the company's ability to go against the grain and keep relatively healthy balance sheets during the cyclical downgrade will likely put the company in a favorable position for the long-term.

We see First Solar as an out of favor, out of cycle leader in its industry, Rose wrote in the note.

The analyst explained how the need for large utilities to catch up to emissions reduction targets will likely be a boon to First Solar. In a wider sense, he noted how the consumer markets in China, India and the United States have barely scratched the surface of adoption for solar energy alternatives.

Less than 15% of installations are in U.S., China and India, Rose said, citing data from 2011.

The equity expert believes the trouble facing Vestas -- which said it was firing 2,335 workers globally and could axe 1,600 more in the U.S. if state-finance subsides were cut -- should not necessarily translate to issues in the solar energy market. where adoption will be driven more by the demand of private enterprise.

There's still some very ambitious targets that have been set by the utility companies and those seem to be in a different tone to the state subsidies for the implementation, he said noting previous state subsidies have not been tremendously helpful so far.

Rose's comments come as a relief rally is picking up publicly-traded shares of solar energy stocks. The Claymore/MAC Solar Global Index, a global sector benchmark, is up 27.2 percent since Dec. 28, when it closed at a historical low.

Shares of Tempe, Ariz.-based First Solar, which are up 29 percent for that same time frame, were down by 41 cents, or .98 percent, during afternoon trading Thursday to $41.39 per share.

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