Solar Subsidy Realities Sink In (LDK, STP, TSL, CSUN, JASO)

The excitement in solar shares yesterday is already being met by selling and quick profit taking this morning.  Yesterday’s news of the China subsidy that may bring in another 500-MW over the next two years or more may have more bark than bite.  Of course this is far from bad news.  But major players from China are giving back the gains as the realities of the news set in.  LDK Solar Co. Ltd. (NYSE: LDK), Suntech Power Holdings Co. Ltd. (NYSE: STP), Trina Solar Ltd. (NYSE: TSL), China Sunergy Co. Ltd. (NASDAQ: CSUN), and JA Solar Holdings, Co., Ltd. (NASDAQ: JASO) are mostly lower.

Wuxi, China-based Suntech Power Holdings Co. Ltd. (NYSE: STP) is up by 0.6% at $17.91 after a near-10% gain yesterday, and its 52-week range is $5.09 to $48.64.

Xinyu City, China-based LDK Solar Co. Ltd. (NYSE: LDK) is down by almost 4% to $10.46 after a 15% gain yesterday, and its 52-week range is $3.75 to $52.40.

Changzhou-based Trina Solar Ltd. (NYSE: TSL) is down by 2.2% to 28.31 after a 9% gain yesterday, and its 52-week range is $5.61 to $34.92.

Nanjing, China-based China Sunergy Co. Ltd. (NASDAQ: CSUN) is down 3% to $4.78 after a 14% gain yesterday, and its 52-week range is $1.33 to $12.31.

Shanghai-based JA Solar Holdings, Co., Ltd. (NASDAQ: JASO) is down the most by almost 6% to $4.60 after a 7% gain yesterday, and its 52-week range is $1.55 to $18.48.

The reason these are lower again is not that the China subsidy is bad news.  The problem is that we now have two trailing quarters of lower PV prices, lower production, lower organic demand, and lowering of estimates.  This China subsidy will offer some aid.  That aid might not get there into the earnings and production until what seems to be the earliest time of late into calendar Q4-2009 or well into 2010.

We still think that solar stocks are more dependent today upon the price of oil than they are dependent upon organic orders that come with or without subsidies.

Jon C. Ogg
July 22, 2009