This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Week in Solar: 'Too Big To Fail' Moment Arrives for China

The social welfare story masquerading as a socially minded clean energy plan, as Chandra refers to the early days of Chinese solar manufacturing development, implies that the Chinese government and the banks want the biggest of the solar companies to make ends meet so they can meet debt payments and refinance as required to stay solvent.

However, to think the Chinese government or banks care if these companies generate the 20% to 30% gross margins that European subsidies afforded them isn't likely. "You can install 10 gigawatts in China, but it won't be juicy profits. It won't be Germany," the Auriga analyst said.

The primary reason to be constructive on solar stocks in 2012 is that as long as solar has a heartbeat, it's one step closer to economics that aren't dependent on subsidies. The investment story is still a few years out, though, and it's the trading story that continues now, and it won't be a one-way trade in 2012. Stocks rallied sharply to start the year after crashing in 2011 but have been clobbered again, most recently with the headlines out of Germany.

"The pain will continue, but the irrationality of a state-oriented capitalism that doesn't have a true market mechanism will begin to fade," Chandra said.

As for Trina's debt covenant issue, it is as related to the larger story in China as the LDK chairman's collateral, and it's even more magnified by the fact that Trina is often held up as the "sound" balance sheet manager among risky Chinese solar companies. "Trina is a one-eyed king among the blind," the Auriga analyst said.

Maxim's Chew expects Trina to revisit 2011 lows of $5 before a more normalized earnings model emerges.

There will be a time to buy solar stocks again, but for now, the big story is the bailout that has been in the making for years and that is now reaching its hell-or-high water mark.

Chinese solar is too big to fail, and it's fair to refer to Chinese solar demand as the likely sector savior in the near-term. After all, China created today's profitless Chinese solar manufacturers, and gave them every reason to believe that when the apocalypse came, they would be saved.

For bullish investors betting on a 7.5 gigawatt market from China in 2012, though, it's not likely to save them.

-- Written by Eric Rosenbaum from New York.

>To contact the writer of this article, click here: Eric Rosenbaum.

>To follow the writer on Twitter, go to Eric Rosenbaum.

Follow TheStreet on Twitter and become a fan on Facebook.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LDK $0.00 0.00%
TSL $9.54 -1.65%
AAPL $94.02 -2.67%
FB $104.07 -5.81%
GOOG $683.57 -3.45%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs