Chao said it is hard not to be concerned about the situation in Europe, even if Energy Conversion Devices is less directly hit by the weakened euro in the immediate. "Some things will be out of their control. What happens if the market in France takes a dip? The macroeconomic environment is not conducive to an aggressive build out in solar in Southern Europe, even with the huge bailout," Chao said. "Paying for solar is a pretty expensive deal as witnessed by what happened in the Spanish market in 2007 and 2008," the analyst added.
Energy Conversion Devices said on the earnings call that the Italian market was responsible for 50% of sales in the last quarter -- and that France, which represented 30% of sales in the first quarter, slipped in the most recent third fiscal quarter, but should grow again. The U.S. solar company downplayed concerns about additional feed-in tariff cuts in France, saying that the country already went through a year-long process of revising the subsidies and it did not think any additional changes were likely.
While Energy Conversion Devices definitely presents a distinct portrait from the crush of the commoditized solar stocks selling into Germany, some analysts remain concerned about the recent woes in Europe ultimately taking a toll on all solar companies. "At the end of the day, one solar company isn't more immune than another. If the euro keeps falling, the only argument to be made is that the euro is bad for solar," Wells Fargo Securities analyst Sam Dubinsky said.
Those words of caution have already been proven well-placed given the euro-related ups and downs in solar over the past few days.The two biggest German solar companies, Q-Cells (QCE) and SolarWorld (SWV) both slumped in trading on Tuesday after reporting first quarter earnings, and the second half outlook from these German solar bellwethers could impact the entire solar sector. Still, for at least one day, Energy Conversion Devices shares were proving immune to the larger trend in solar that again was hitting all the commoditized module markets and solar cell and wafer makers. Yet at a share price still near a 52-week low, it's no surprise that even analysts who believe in Energy Conversion Device and its management are not ready to make a call on profitability. "Just because Energy Conversion Devices has turned the corner, does not mean it is in the clear," said Simmons' analyst Chao. Energy Conversion Devices remains a big question mark for the Street, but even not being in the clear, the solar stock was clearly a Tuesday winner among the larger market noise still rattling through the solar sector. -- Reported by Eric Rosenbaum in New York.
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