Chris Lau, Kapitall: The downside in solar power appears to finally be over. 

Despite dipping at the beginning of May to $24, SolarCity (SCTY) shares rebounded and are trading near an all-time high. Investors are unfazed by its most recent quarter when the company reported in March, 2013 that missed consensus estimates. The company deployed 48 megawatts, a 129% increase over the previous year. As of February 28, the company said it still has 115 megawatts of financing available, giving nearly six months of target deployment. Solarcity has 194 megawatts of backlog. [Related:  Forget Panels, Investors Are Trading Solar Installation and Financing Stocks]

SolarCity filed a suit against the Treasury department alleging that some of the grants SolarCity received, which were taxpayer-funded, were not as large as initially promised. This news helped push shares up by 7% on the week of May 6.

Earlier this month, SunPower (SPWR) reported quarterly revenue of $574.6 million ($635 million GAAP), or $0.22 per share (GAAP loss of $0.46 per share). The company said that initial construction of the Antelope Valley Solar Projects for MidAmerican Solar began. The project is 579 megawatts.

SunPower said that geographically, business in Japan and Europe was healthy. In Japan, 25% of total shipments were from Toshiba and Sharp. In Europe, the company said that it expects to be profitable by the end of the year.

A rally in First Solar (FSLR) shares began in April after the company guided higher. First Solar reported sales that beat estimates by $27.9 million. The company generated revenue of $755.2 million, or earnings of $0.69 per share. Gross margins improved by 7% to 22.4%.

[See Kapitall's solar infographic: Solar Industry Shines Bright]

Risk: Upside Priced in Solar Stocks

Analysts are cautious on First Solar, and the bullish forecast given by the company may already be priced in its shares. SunPower, SolarCity, and First Solar are all at or near a yearly high. A reversal in sentiment for the market could spark profit-taking for solar energy companies. Investors should be cautious on the weaker players. The monthly return range between 17.8% and 77%:

Final Thoughts

The bankruptcy of SunPower and the minimal competition from smaller players like LDK Solar (LDK) are having a positive impact on the existing players. Investors should continue to expect additional upside in solar energy plays in the long-term.

Written by Chris Lau, KAPITALL Contributor