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
TheStreet Open House

Why this one solar stock has the most upside

Chris Lau, Kapitall: Solar stocks are staging a comeback after a rough couple of years. Which solar stock has the brightest future?

Solar energy plays rose and fell dramatically over the last few years after a confluence of bad news hit the sector. The end of solar subsidies, excess supply, and weakening demand all pushed solar stocks to multi-year lows last year.

Read more from Kapitall: Are there any music streaming standouts?

All of that changed in recent quarters. Weak firms went bankrupt, and strong ones found a way to sell solar panels profitably. Trina Solar (TSL) led the sector higher after reporting a very strong first quarter last Wednesday. The upside for solar could be just the beginning.

Trina surprises market

Trina warned markets in April that it would ship and  sell less product than consensus. At the time, the company blamed a temporary decrease in shipments to the EU as the reason for the miss. In the quarterly report, Trina not only reported a sharp increase in profitability (gross margin), the company also said shipments would grow by as much as 1010 megawatts (“MW”) in the current quarter (Q2).

Still some concerns

Trina has a healthy $577.7 million in cash, but its bank borrowings are $982.5 million. Gross margin was higher, thanks to shipments to regions that offer high average selling prices for Trina. Not all plays in the solar sector responded to Trina’s results:  First Solar (FSLR) and SunPower (SPWR) both added a few points, but the trajectory of its share price is still downward.

Upside

Trina’s valuation is very low compared to SunPower and First Solar. The latter two trade at a forward P/E of 28 and 24, respectively. Trina’s forward P/E is just 15. Still, First Solar continues to win deals. It most recently announced a collaboration with Ingenero, an Australian solar firm. The two companies will develop a hybrid diesel-solar power plant for  Rio Tinto's (RIO) Weipa bauxite mine in Australia.

SunPower has yet to really recover from the selling pressure it faced earlier in May. The firm forecast Q2 revenue and earnings would be below consensus. It expects revenue will be as high as $625 million on earnings of $0.35 per share. For the full year, SunPower projects earnings of $1.10-$1.40 per share.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,071.22 -41.93 -0.24%
S&P 500 1,977.80 -5.05 -0.25%
NASDAQ 4,505.8520 -6.3420 -0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs