Solars Hold Up Well Despite Piper Jaffray Estimate Cuts

According to, Piper Jaffray is out cutting estimates on the solar sector due to poor visibility.  Piper analyst Jesse Pichel lowered industry estimates for the 1st half of 09 and downgraded their rating of Canadian Solar (CSIQ) to Sell and ReneSola (SOL) to Neutral due to low order visibility for Q1 in Germany and zero visibility in other markets but expects some recovery in late spring, early summer but only if credit markets don’t worsen. 

On CSIQ: “We downgrade CSIQ on 1) stock nearly doubled from $3.11 to $6 in the last 30 days 2) to reflect our lowered ASPs, volume on weaker demand and our estimates are now at lower end of the Street 3) UMG strategy may not be as viable with poly at $125/kg 4) upside seen as limited near term. 5) We believe company’s target of 500-550MW for 2009 is unachievable based on current conditions and CSIQ is likely to offer more conservative guidance and growth target for 2009.”

On SOL: “We downgrade SOL from Buy to Neutral on 1) the recent ~30% run-up on SOL in the last two days 2) lowered ASPs and volume to reflect weaker than expected wafer demand. 3) We also believe upside is limited near term. Our numbers are now below consensus and in our opinion the company is likely to offer much more conservative growth assumptions for 2009, which could represent further downside to our numbers.

In addition, the firm lowered estimates for Evergreen Solar (ESLR), LDK Solar (LDK) and GT Solar (SOLR).

“Latest channel checks with worldwide solar installers and project developers confirm solar installations grew in Q4 for Germany and Italy, but were weak in all other major markets. As a result of credit crisis push-outs and normal winter seasonality, visibility for Q1 remains poor as most of the German market is rooftop and of a “turns” nature. Project developers report that financing is “getting done” albeit with lower debt that can be refinanced at a later time, and 1H project backlog appears largely intact at this time. The US market remains nascent as utilities are unlikely to move the needle in 2009. At the end of the day, the solar industry is very much a credit call and if the situation does not worsen, end markets could rebound in April for Germany and May/June for other markets given higher IRRs generated from lower priced modules. Thanks to strong policy support from the German government and increased solar financing from the KfW, we anticipate that Germany will remain the pillar of industry growth in 2009 and thus leverage to this market will be a key differentiator for OEMs.”

Piper continues to favor shares of Yingli Green Energy (YGE) and First Solar (FSLR).  They like Yingli due to its Germany exposure and First Solar because it continues to sell out its production given that its panel is priced far more aggressively that traditional silicon based modules and don’t see excess inventory.

Solars are holding up quite well despite the industry estimate cuts and downgrades.  The Claymore Global Solar ETF (TAN) is roughly unchanged at this point and the solar names that were downgraded this morning are all  trading up.  While solars have already had a decent run in recent weeks and prone to a bit of a pull back this is further evidence that the bulk of the selling in top solar names is probably done.

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