Solar’s Shade: Nero or Blackout? (FSLR, JASO, LDK, SPWRA, TAN, KOL, XLE, USO)

Notwithstanding a solid fourth quarter and an up year, First Solar, Inc. (NASDAQ:FSLR) is off more than 15% in early trading this morning. We noted its strong earnings report yesterday, but warned that guidance for 2009 was the important missing piece.  This is pressuring other solar stocks and is coinciding with moves in other sectors. It shows that even an Obama-favorite industry might not be able to escape the reality of the business climate.

First Solar provided that piece saying, “The short-term outlook for the solar industry has never looked more difficult.”  The company expects revenue for 2009 to be about $200 million less than previous estimates, and it looks like the company has extended more generous payment terms to customers. Neither of those statements plays well to the gallery.

The effect of First Solar’s predictions for 2009 has had a chilling effect on other solar shares. JA Solar Holdings Co. Ltd (NASDAQ: JASO) is down more than 6%. LDK Solar Company (NYSE: LDK) has dropped more than 4% this morning. SunPower Corporation (NASDAQ: SPWRA) fell more than 7%, and even the Claymore/MAC Global Solar Energy ETF (NYSE: TAN) is off 7%.

The pullback is coinciding with what we are seeing in other energy ETFs as well. Market Vectors Coal (NYSE:KOL) is down slightly, as is Energy Select SPDR (NYSE:XLE). Only United States Oil Fund (NYSE:USO) is up slightly.

Energy stocks just can’t get any traction because the economic outlook is so weak for the next couple of quarters. No one expects energy use to rise because the economy is forcing manufacturers to reduce production and consumers to cut spending. Lower demand for goods is lowering demand for energy, no matter the source.

While the drop in non-solar ETFs can’t be attributed solely to First Solar’s guidance, when it is combined with already soft outlooks from coal and oil producers, the overall picture that emerges is not one that supports growth in energy use for the near term. Solar energy has taken some hits from hydrocarbon producers for a long time. But now, it looks like it could be developing its own hammer.

Paul Ausick
February 25, 2009