Credit Suisse Chimes In On Solar Stocks: Cautious Calling 2011 A Transition Year; Top Picks WFR, JKS, TSL, STP

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09:40:17 pm on January 11, 2011

Earlier today I posted a summary of Auriga’s bullish outlook on solar stocks for 2011.  According to Barrons, Credit Suisse has also posted their outlook for solar stocks this year, but is less bullish.  They have a cautious view in the near term and a Market Weight rating on the sector.

Auriga commented on the elasticity of the solar market where demand picks up as prices fall.  Credit Suisse notes that this has traditionally been the case but this year could be a transition year where demand is less elastic as panel prices fall from current prices of $1.75/watt.  They expect Germany and Italy which account for 50% of the solar market to target fixed GW levels regardless of panel prices.  They see differentiation on channel strength and low cost manufacturing as key themes for 2011. 

On the valuation front, the firm notes that solar stocks aren’t expensive but have corrected only 12% from the peak Oct 2010 levels. I have to wonder which solar stocks they are looking at when they claim a 12% correction.  Looking at the Guggenheim Solar ETF (TAN), the peak to trough correction was 26% and many of the China solar names corrected considerably more than that. 

In a nutshell they believe investors should remain on the sidelines for now but they maintain their Outperform ratings on both MEMC Electronic Materials (WFR) and Jinko Solar (JKS).

They believe First Solar (FSLR), Sunpower (SPWRA), MEMC Electronics (WFR), Suntech (STP), Yingli (YGE) and Trina Solar (TSL) have the strongest channels in order to weather the margin pressure the best.  Trina and Suntech are highlighted as most interesting which I’ll assume means have the greatest upside potential.

They also mention JA Solar (JASO) and ReneSola (SOL) as companies that can compete on price but that will need to invest more to benefit from channel differentiation.  Phew! Got all that? 

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