NEW YORK (TheStreet) - When the biggest solar stock bear on Wall Street -- an analyst selected by CNBC for one of the "shorts of the year" in 2011 -- gets nervous about sell ratings on solar stocks, pay attention.
A report from Deutsche Bank suggesting that solar demand may improve more than expected in 2012 and that pricing may stabilize led to a monster rally in solar stocks, but that report may not be the most telling read from the solar analyst ranks.
If you don't trust Deutsche Bank, you might want to take a look at the flurry of reports put out by Axiom Capital analyst Gordon Johnson -- sent with red exclamation marks in the email subject line -- removing his sell rating on five solar stocks, including First Solar (FSLR) -- the aforementioned "short of the year" and a stock which he just lowered his price target on last week, to $26. First Solar rallied to above $42 on Wednesday.
When Johnson lowered his First Solar price target but commented in the change that the First solar short had "almost run its course," one peer solar analyst commented that it was as good a sign of a bottom in solar as any other data point.And that was before it became known on Friday afternoon that Germany had installed 7.5 gigawatts of solar in 2011 thanks to a huge fourth quarter, a typical short-term frenzy driven by declining subsidies in the world's biggest solar market. The subsidy-driven trade in solar may be a signal of much that is wrong with the economics of the sector, but it's also always been a driver of trading and short-term gains in solar shares. Johnson removed sell ratings on First Solar, Yingli Green Energy (YGE), Trina Solar (TSL), Suntech Power (STP) and Power-One (PWER). He didn't move to a buy, but moving to a neutral was enough to signal that the great solar short may have run its course -- or at least this course of the great solar short may be completed. The rationale provided by Johnson for moving to the sidelines on solar stocks was good evidence of the prevailing solar bearishness swinging back to a more optimistic view, at least as a near-term trade.
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