Earlier this week, First Solar scored a 115-megawatt deal with EDF in France for a major solar project. While the sale of its modules for the 115-MW project may not have been profitable given current solar oversupply, it does underscore the fact that First Solar can still compete with the Chinese module makers, said Aaron Chew, analyst at Maxim Group. First Solar has been beaten down as low as $29 on fears that given the cratering of prices in solar it is no longer a viable competitor to the Chinese module makers outside of the pipeline of projects that it owns.
"The case for First Solar modules not being competitive is overstated," said Paul Clegg, Mizuho Securities analyst. "Depending on the situation and what it's bringing to the table, you can't say it's the unparalleled cost leader anymore, but it's cost competitive with peers," Clegg said.
Shares of Power-One, which was a darling among solar stocks in 2010 as German and Italian demand buoyed its shares, have declined by 58% in the past year. The solar inverter companies have long made the case that it was only solar modules, and not solar inverters, that faced massive oversupply and pricing erosion. However, in 2011, that glut and pricing weakness extended to inverters and Power-One's argument -- and commentary throughout the year that Europe was improving -- proved to be flawed.
Suddenly, though, it looks like Wall Street is starting to believe commentary from solar about the European situation improving, at least as far as one more short-term trade in solar with the cat-and mouse game between pessimism and optimism in the sector continuing.And to make one important point clear amid short-term volatility, Johnson doesn't like the fundamentals of solar one bit, even if a trading upswing has to be protected against when holding short positions. "Stocks trend higher on this BS German pull-in trade...I will have another opportunity to short this space...By Dec. '12, all of these stocks will be at historical lows," Johnson wrote in an email to TheStreet. "I just hope the average TheStreet.com reader gets out before the big collapse happens," Johnson added. To add one more note of caution about a solar rally of this magnitude, "Remember Fukushima." The Japanese nuclear disaster was the last time that the march of solar stocks -- in that case an inevitable march onward and upward -- turned out to be one more payday for the shorts, once all was said and done. -- Written by Eric Rosenbaum from New York.
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