Cowen & Co is out with a positive call on Solars saying most of the U.S. solar names look undervalued relative to growth and earnings, in teir view, reflecting four areas of investor concern: uncertainty about the next phase of subsidies in Spain, Germany and the U.S.; and the tension between silicon supply/cost and module ASP/demand. Each of these is likely to be clarified in the next two to six months, underpinning a group rally. Firm reiterates Outperform on ENER, ESLR, FSLR, HOKU, SPWR, STP, and TSL.
- Cowen believes a bill to extend tax credits for renewables may be introduced in the Senate on Earth Day, April 22nd. Details must still be worked out. However, they see improved chance of passage.
- Followed By Spain, Then Germany. Zapatero's Socialist Party retained control in the recent election, so support for renewable energy should continue. With new feed-in-tariff rates due to take effect in October, they believe legislation should be settled by July. And, the final bill is likely to be more favorable than the last draft, with a higher FIT (33-35c vs. 31c) and increased cap (perhaps 2GW vs. 1.2GW). While the new German FITs are likely to be in line with expectations (down about 9% in 2009, then 7% and 8% in 2010/11), this major market should also be more certain by Q3.
- Investors are skittish about potential supply disruptions, and there is a wide range of views regarding module ASPs in H2:08 and 2009. By the Q2 earnings cycle, the firm expects: more output from new poly plants, silicon prices to be past their peak, modules to be essentially sold out for H2 at firm prices, and much more confidence regarding 2009 ASPs.
Notablecalls: As you can remember SunTech (NYSE:STP) has been Cowen's favorite Solar play lately. They have good exposure (50%+) to Europe, especially Spain and the valuation is just so low here. I have been positive on STP around current levels and continue to be so.
I think Cowen's call is very buyable here. Would not be surprised to see STP around $35 in a week.
Be early.
- Cowen believes a bill to extend tax credits for renewables may be introduced in the Senate on Earth Day, April 22nd. Details must still be worked out. However, they see improved chance of passage.
- Followed By Spain, Then Germany. Zapatero's Socialist Party retained control in the recent election, so support for renewable energy should continue. With new feed-in-tariff rates due to take effect in October, they believe legislation should be settled by July. And, the final bill is likely to be more favorable than the last draft, with a higher FIT (33-35c vs. 31c) and increased cap (perhaps 2GW vs. 1.2GW). While the new German FITs are likely to be in line with expectations (down about 9% in 2009, then 7% and 8% in 2010/11), this major market should also be more certain by Q3.
- Investors are skittish about potential supply disruptions, and there is a wide range of views regarding module ASPs in H2:08 and 2009. By the Q2 earnings cycle, the firm expects: more output from new poly plants, silicon prices to be past their peak, modules to be essentially sold out for H2 at firm prices, and much more confidence regarding 2009 ASPs.
Notablecalls: As you can remember SunTech (NYSE:STP) has been Cowen's favorite Solar play lately. They have good exposure (50%+) to Europe, especially Spain and the valuation is just so low here. I have been positive on STP around current levels and continue to be so.
I think Cowen's call is very buyable here. Would not be surprised to see STP around $35 in a week.
Be early.
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