This week's bullish trade on solar has taken place as two leading German solar companies released extremely cautious outlooks about the solar market in 2011. The words from the top executives at Germany's Q-Cells and SMA Solar should at least be reason for solar investors to pause and consider whether negative surprises are coming in first quarter results, regardless of the long-term outlook for solar stocks. German solar company Q-Cells provided a 2011 outlook on Tuesday that outlined the divide between long-term bullishness on solar after the Japanese nuclear crisis and German elections, and the short-term fundamentals. After its guidance of flat year over year revenue, Q-Cells told Reuters that it does not see a short-term benefit for the solar industry from the gains made by the Green Party in Germany. Q-Cells CEO Nedim Cen told Reuters, "Germany alone will not be strong enough." The Q-Cells CEO also said that the nuclear crisis in Japan will not likely have a major global impact on the solar sector. "Overall at the current moment it is not possible to assess the expected development for the financial year as a whole. On the one hand, the effects of cutbacks announced but not yet quantified by the respective governments in important European markets, such as Italy, Germany and France, cannot be estimated at this time. On the other, the current situation in Japan has opened a discussion regarding the future of nuclear power, which will have an impact on the energy mix. From today's perspective, what is clear is that the first quarter of 2011 has been characterized by very weak demand as a result of the regulatory situation and seasonal influences," Q-Cells said in its earnings release. On Wednesday, German solar inverter giant SMA Solar said the solar market could shrink in 2011. "Due to changes in support programmes in important European solar markets, SMA predicts a temporary stagnation in the market in 2011. A slight downturn in growth cannot be ruled out," the solar inverter company said in its earnings release. While solar stocks have been climbing higher, Q-Cells predicted flat year revenue, and SMA Solar did not revise its guidance higher, as many solar companies did with fourth quarter results. Q-Cells is a company that has gone through a major restructuring and has struggled to regain its footing, and some analysts are hesitant to use Q-Cells as an industry "read." However, there was concern from Wall Street after the German solar company reports about the potential for solar company earning pre-reports that may revise recent guidance lower.
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