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Solar Stock Swingers: Energy Conversion

The Chinese solar outperformers from Monday, ReneSola and LDK Solar, were both suffering through losing days on Tuesday, with ReneSola down more than 8% by day-end and shares of LDK down close to 6%.

In fact, amid all the solar earnings news and the market noise related to the euro and China, the only solar winner from Monday that continued to rise in Tuesday's trading session was Energy Conversion Devices (ENER), but even its gains were wiped out by the end of the day, ending trading on Tuesday flat.

There's a bit of irony in the fact that while the Chinese companies report better-than-expected earnings and attempt to recover from last week's steep selloff, it's a U.S. solar company that has been plagued by fears of bankruptcy for much of the past year that managed to sustain its rally during the renewed selling in the solar stock sector. Even though Energy Conversion ended the day flat, it was still notable that JA Solar was down 7.5% on Tuesday and ReneSola down more than 8% after reporting earnings beats.

Granted, a rally in Energy Conversion Devices' shares doesn't take much, as the U.S. solar stock is already priced near the low end of its 52-week range -- and has been for months. And other niche U.S. solar stocks were also among the only solar sector plays with positive trading on Tuesday, including Spire (SPIR) and Hoku Scientific (HOKU).

Investors also need to keep in mind that Energy Conversion Devices hadn't traded below $7 a share before last week's big selloff, so recovering to near-$7 is not saying all that much.

From one respect, though, the Energy Conversion Devices performance on Tuesday showed that it is a very different solar animal than the commoditized module makers that are being hammered by the euro slide. Energy Conversion Devices has little business in Germany, which has been driving most of the demand for solar coming from Europe. The commoditization of the solar business has made the euro all-important as the solar module makers look to move as much product as possible into Germany, much of it manufactured in Asia and then sold in euros.

Energy Conversion Devices, on the other hand, with its niche solar laminate for the building integrated photovoltaic market (BIPV), is focused on France and Italy. It is not immune to the euro, though. Energy Conversion Devices estimates on its earning conference call on Monday that it currently has $15 million in euro exposure, and that a 5% move in the EUR/USD exchange rate would result in $750,000 of currency value gain/loss.

The overall atmosphere on the Energy Conversion Devices call from the Street on Monday afternoon was cautious scraps of congratulations from the Street. There was none of the usual "Congratulations on a great quarter.." that often prefaces any question from the Street to company management. Instead, analysts seemed to accept that Energy Conversion Devices had made good on its promise to show some progress, but the outlook was still uncertain.

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