Solar Stock Winners: Power-One

Power-One powers through Street expectations for its second quarter earnings, another upstart solar inverter maker that is beating the Street as a result of solar demand.
Author:
Publish date:

(Solar winners Power One story updated for Friday morning trading, analyst commentary)

NEW YORK (

TheStreet

) -- There were bigger solar sector companies reporting on Thursday after the market close, but the only one to receive a boost from its second quarter earnings was

Power-One

(PWER)

.

The solar inverter company kept the streak alive of solar inverter outperformance in the second quarter, beating the Street on earnings and revenue expectations. Power-One shares rose in the double-digit percentage level in after-hours trading on Thursday, and were among the market's top gainers early on Friday morning. Power-One shares were rising by as much as 25% on Friday morning, on double the average daily volume of shares traded, or close to 6 million shares traded in the first hour after the market open.

Power-One's gains of close to $2.50 on Friday morning were most striking for doubling the stock's 52-week low of $1.19.

The earnings reports from

First Solar

(FSLR) - Get Report

and

MEMC Electronic Materials

(WFR)

were the highly anticipated solar sector reports kicking off the earnings season for solar stocks on Thursday afternoon.

Advanced Energy Industries

(AEIS) - Get Report

reported a big earnings beat last week. Power-One, similarly, has seen its solar inverter business grow amid the high solar sector demand, even though it was not historically a core business for the company.

>>Solar Winners: Advanced Energy

Power-One posted earnings of 17 cents per share on revenue of $215 million, well ahead of the Street consensus of 10 cents earnings on revenue of $185 million. It was a record revenue for Power-One, and for the first time, the company offered revenue guidance for the third quarter. At $250 million to $270 million, the Power-One guidance was well ahead of the Street expectation of third quarter revenue at $200 million.

Inverter and related product sales posted a record $142 million in revenue for the second quarter 2010, or a year-over-year increase of 745% from $17 million in the second quarter 2009. The Power-One Renewable Energy Solutions unit contributed the majority of the company's revenue, at 66% of total sales in the quarter, versus 18% in the second quarter of 2009. Power-One shipped 529 MW of inverters in the quarter.

"We are continuing to take share in the inverter market," said Dr. Alex Levran, President of the Renewable Energy Solutions SBU.

One of the issues for a rising inverter maker like Power-One is the current demand craze in solar ahead of feed-in tariff cuts in Germany. Can Power-One keep up its rapid growth as solar demand normalizes after the German feed-in tariff cuts?

Walter Nasdeo, research director at Ardour Capital, said investors should expect to see a normalization of revenue in the next year, in the upper $200 million range, and the percentage growth tapering off, but that's because Power-One is coming off such a small base in the inverter market. It's sustainable market share growth in the inverter space, and sign of a maturing company, which is a good thing, in the opinion of the Ardour Capital analyst. It was the third consecutive quarterly beat for Power-One. "At least they are on the radar screen now," the analyst said.

Every company in the inverter space is selling everything they can make right now, and the next phase of growth will be companies going head to head, where pricing and product differentiation become more important. "It still has to be a good company, not just in a hot space, and there will be room for a company like Power-One," the Ardour analyst added.

"SMA

the German inverter market leader will continue to dominate the inverter market globally, but we will see other companies like Power-One carving out significant niches," Nasdeo said, adding, "We see growth potential for Power-One onto the foreseeable horizon." Ardour Capital now has a $17.50 price target on Power-One shares.

Nasdeo noted that providing revenue guidance for the first time helps provide investors with comfort that the growth trajectory is still intact, as previously, there had to be a leap of faith with no guidance from the company on projected revenue.

First Solar easily beat the Street, but unlike last quarter when a beat led to a $22 hike in First Solar's share price, the after-hours reaction on Thursday to another healthy First Solar outperformance of Street expectations on earnings and revenue was selling action in First Solar shares.

>>First Solar Beats Again, Shares Don't Follow

MEMC reported earnings of 6 cents, below the Street expectation of 9 cents per share. MEMC revenue came in short of expectations, too, at $448 million, versus the Street at $466 million, and it lowered its previous full year earnings per share guidance.

The big drop from MEMC was in the SunEdison solar systems business that it acquired last year, where revenue dropped by 50%.

>>SunEdison Drags Down MEMC Earnings

Both MEMC and First Solar continued to trade down on Friday morning. MEMC opened lower by close to 14%. First Solar opened lower by 6% in Friday trading.

-- Written by Eric Rosenbaum from New York.

RELATED STORIES:

>>First Solar Beats Again, Shares Don't Follow

>>German Solar Data: the Good, the Bad, the Fearful

>>Waltons Sell More Shares of First Solar

Follow TheStreet.com on

Twitter

and become a fan on

Facebook.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.