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SolarCity, SunEdison, First Solar Are Sky-High but That Could End Tomorrow

NEW YORK (TheStreet) -- U.S. solar stocks are on a roll. Over the last 52 weeks, shares in First Solar (FSLR - Get Report) , the largest U.S.-based producer of solar systems, are up 90%. SunEdison (SUNE) , which makes silicon wafers for solar systems, are up 203%. Shares in SolarCity (SCTY - Get Report) , which finances residential and small commercial systems, have more than doubled, up 112%. Shares in SunPower (SPWR) , which makes high-yielding photovoltaic systems, are up 80%.

But these gains could be given back over the next few months. Some of these stocks have already begun to stall or roll back to the down side. This doesn't mean renewable energy itself is "a gamble," as a recent story on German energy insists. Cost parity between fossil and renewable energy -- without incentives -- is coming to many areas, and low-cost energy is the name of the game.

But will U.S. companies win that game? And how should investors play it?

First let's look at First Solar. Its results are profoundly impacted by its ability to create and sell off utility-scaled solar projects. It booked sales of $950 million for the March quarter, but just $544 million for June. Profitability nearly disappeared, from $112 million in the March quarter down to $4.53 million for June.

First Solar uses cadmium telluride (CdTe) rather than silicon-based photovoltaics. It has driven the yield on such cells to as high as 21%. But CdTe is a mature technology. Efficiency gains are slowing. Cadmium is toxic and tellurium may be increasingly rare. First Solar's ability to compete on a cost-per-kilowatt basis with other solar technologies is subject to question.

Or consider SunEdison. Before changing its name to SunEdison, MEMC Electronic Materials (the first M stood for Monsanto (MON) , of which it was a business unit) traded for as low as $1.60 per share just over two years ago. It is not profitable and revenues are not growing. Its debt-to-assets ratio has been climbing steadily and operating cash flow is negative. TheStreet Ratings has it rated as a sell.

But there's hope for SunEdison in a solar plant operator purchased in 2009. It has a joint venture with Samsung (SSNLF) to open a solar materials plant in Korea, and it acquired cheaper production technology in 2010. The top line has also grown 50% between the June quarter of 2013 and this year. But where are the profits?

SolarCity's rise has two reasons behind it, Elon and Musk. Musk's cousins, Lyndon and Peter Rive, run the company. SolarCity announced recently it would buy Silevo, which makes high-yielding photovoltaic systems, and produce those systems at a plant near Buffalo, NY. It was Musk who took the questions, and the stock zoomed upward on the news.

Financially there is little to recommend SolarCity, despite Musk's allure from his Tesla (TSLA) venture. Revenues are up for SolarCity, but so are losses -- for the March quarter those losses were $75 million on revenue of under $64 million.

This is to be expected. SolarCity's business is financing homeowners' installations of solar power. As with a bank, money goes out fast and comes back slow. TheStreet also rates SolarCity as a sell.

Up next: SunPower.

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