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Solar Winners: LDK Solar Rallies Alone

Stocks in this article: JASO LDK SOLF SOL ENER

(Solar Winners story updated for Phoenix Solar report)

NEW YORK ( TheStreet) -- LDK Solar (FSLR) was alone among solar stocks rallying on strong earnings, hitting yet another 52-week high on Tuesday. The LDK rally hasn't been the solar sector standard bearer for the earnings reaction from solar investors in this third quarter. Even in LDK's case, it hit a 52-week high shortly after the open and then traded down for the remainder of the day, swinging from a high at $15.10 to a close at $13.90. By Wednesday morning, the new 52-week high for LDK was a fleeting moment, and shares were down more than 6%.

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Solar investors just aren't feeling the love for solar stocks no matter how much they beat third-quarter numbers by or how much they raise numbers ahead of the fourth quarter. As for statements that 2011 orders are sold out and pricing adjustments aren't even an option for customers, all the good 2011 commentary seems to be falling on deaf ears.

Case in point: the only other solar stock rallying on Tuesday was Energy Conversion Devices (ENER), the perennially imperiled niche U.S. solar company.

When a company with an earnings loss is rallying because it managed to generate operating cash flow in a quarter, while companies beating Street EPS estimates by a wide margin are declining, there's something wrong in the state of solar, and it's not because Denmark is lowering feed-in tariff subsidies.

"While certainly more a positive than a negative for its balance sheet, we do not view this source of cash flow as sustainable and continue to look towards positive operating income as critical to stem ENER's cash bleed over the long term.... Despite the operating cash flow upside, continued net losses cannot be ignored.... ENER generated a net loss (x-1x items) of ($14m) in the quarter," wrote Hapoalim analyst Aaron Chew in an earnings wrap on Energy Conversion Devices.

Meanwhile, JA Solar (JASO) easily beats the Street and says that demand looks great for 2011 and hears ... nothing but crickets. There are even critics of the LDK rally, saying that the reason it fizzled down from its 52-week high was because it was a rally sustained by short-covering anyway. Analysts raised JA Solar numbers in reaction to the earnings and said, more or less, "investors just don't get JA Solar."

JA Solar bulls like Jesse Pichel argue that the selloff in JA Solar shares, which continued on Wednesday morning, was simply a function of investors not understanding the company's conservative approach to gross margin guidance. Yet other analysts, like the team at Stifel, worry that its margin profile is falling behind that of vertically integrated Chinese peers.

In any event, it seems the nitpicking over the details in solar earnings may be the equivalent of making mountains out of mole hills, and the real mountain that can't be moved right now is overall concern about 2011, which is nothing new for solar.

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