FBR Capital Markets: Today’s Solar Stocks Rally "Driven By Innacurate Assessment Of China Subsidy News"

Hat tip to StreetInsider.com for the following comments out of FBR Capital Markets which basically said the run up in solar stocks today on the China solar subsidy news is an overreaction.

FBR said the “Golden Sun Program” will not save solar stocks entering earnings season and that the translated version of the press release issued by CMF suggests that the central government in China decided to support financially any electricity generated by solar PV projects of no less than 500MW BUT over a period of 2-3 years. Additionally, CMF is considering subsidizing 50% of PV systems and related transmission equipment cost, and up to 70% of those cost in rural area with no electricity.

Here’s the quote from FBR:

“We are already assuming 300MW of installation in China in CY09, 750MW in CY10 and well over 1GW/yr after CY10. Thus, the real material impact from the China market may be already baked into our industry estimates! However, the China news, in our view, is providing good PR for China-based companies. Yet, in our opinion, it may be insufficient to offset the expected shortfall to CY09 earning expectations. We simply do not believe that the full extent of disappointing results is baked into stock prices. In fact, in addition to weak fundamentals, we encourage investors to focus more on the dilution impact of de-leveraging balance sheet that is currently underway among China-based solar PV companies, rather than buying into hyper-inflated expectations from the China market.”

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