Yingli Green Energy to Outperform Solar Stocks: Poll

NEW YORK (TheStreet -- First Solar(FSLR) provided the first earnings surprise of the solar season -- but will it be the last surprise, or the biggest one?

Maybe not, based on the way that shares of JA Solar(JASO) were trading on Monday. JA Solar shares were up 12% on Monday, yet there was no obvious news from the Chinese solar cell company.

While Monday was an up day for the solar sector, JA Solar's one-day returns far outpaced optimism in the solar sector. Perhaps investors were betting on an easy beat by JA Solar in its upcoming earnings, as pricing power remains in the hands of the cell-and-wafer players given current demand levels. JA Solar already announced earlier this quarter that its shipments would come in ahead of previous estimates.

As far as the optimism about solar demand that could lead to more positive earnings surprises, a report from Europe's main solar trade group on Tuesday estimated that the solar market will grow to a demand level close to 13 gigawatts this year, in line with the more rosy forecasts for solar demand that have changed the nature of debate about the impact of the looming feed-in tariff cuts in Germany.

First Solar's ability to shift its business to modules sales into Germany and other European countries in response to the massive demand levels in the first half of 2010 led to a first quarter beyond the Street expectations, and led First Solar to raise its earnings guidance for 2010. From its share-price doldrums earlier this year around $100, First Solar has rallied to above $140 on the strength of its outlook -- though immediately after its earnings last week, First Solar shares had shot all the way above the $150 mark.

JA Solar was immediately down 5% at the open on Tuesday, and First Solar and all the other solar players were joining in the selloff as the markets went into a tailspin as European debt fears continued to weigh heavily on trading. Maybe JA Solar's big up day on Monday just means that things are back to normal in solar, with huge, unexplainable rallies followed by volatile downswings compounded by overall market sentiment.

All the fears that the Chinese solar players were set to overtake First Solar now seems an argument on shakier ground, as First Solar stakes out a bold plan to reach 30% market share. The shakeout in the solar sector will have the Chinese solar companies taking market share, but will it be market share gains from just about every company but First Solar?