Not sure, if somebody posted already. It's mostly SPWR, but will affect all solars. Here you go:
Sunny Skies for Solar Stock By JACQUELINE DOHERTY
IT HAS BEEN A DARK JANUARY for San Jose-based SunPower, whose shares have fallen 60%, to 66. Weighing on the stock are recession fears and the looming expiration of a solar tax credit at year end. But the sell off is overdone, and the solar-power producer's shares soon may shine again.
SunPower (ticker: SPWR) trades at 32 times Wall Street's 2008 earnings estimate of $2.07 a share, and 20 times the '09 consensus of $3.30. The company's '08 guidance is somewhat lower, at $2 to $2.10 a share, on revenues of $1.2 billion to $1.3 billion. SunPower's multiple doesn't seem high in light of forecasts that earnings will grow by 40% to 50% at least through 2010. If the company can meet '09 forecasts and trade up to 40 times earnings -- the low end of its expected growth rate -- the stock would sell for more than 130. Its multiple peaked last year at 79 times estimated earnings, and its shares, 57%-owned by Cypress Semiconductor (CY), at 164, when all solar stocks soared-yes, too close to the sun.
Retail buyers account for 45% of SunPower's revenues, companies and institutions, 55%. The stock has come under pressure with the government's $2,000 solar tax credit for individual buyers set to expire this year, but retail purchases -- at an average pre-credit price of $40,000 -- are driven by more substantial credits offered by California and New Jersey. The elimination of the corporate tax credit likely would have a bigger impact on earnings; corporations can deduct 30% of the cost of solar systems from their taxes. If that tax credit isn't extended, the company plans to shift many of its commercial sales to Europe and Japan, where it already operates. International sales account for more than 40% of revenue.
THE U.S. SENATE TRIED TO attach an extension of the solar tax credit to the economic stimulus bill, but it failed to pass. While an extension could be reintroduced anytime, it most likely will be part of a package considered in the fourth quarter that would extend the wind and solar tax credit and the research and development tax credit, and apply a "patch" to the dreaded alternative minimum tax. "There's so much bipartisan support for the wind and solar package" that there's an 85% to 90% chance it gets passed by year end, says Daniel Clifton, head of policy research at Strategas Research Partners.
If not, it will be re-introduced in 2009, says Tom Gallagher, head of policy research at ISI Group. "We would like it to pass sooner rather than later," says Tom Werner, SunPower's CEO. "It's a very low-cost way of moving the country toward renewable energy."
The Bottom Line:
SunPower's stock was cut in half after the solar bubble burst. Now it could double, with earnings growing 40% to 50%.More recent concerns about SunPower center on an expected pick-up in the supply of polysilicon -- a key ingredient in solar panels -- and a resultant drop in prices. This could lead lesser players to produce more, and create a solar-panel glut. SunPower fully expects panel prices to fall, but aims to expand its margins to offset any decline. The company hopes to reduce the cost of a system by 50% by 2012, in part because efficiencies will increase as volumes rise.
When systems drop in price, "you address huge new market segments," says Werner. Tax credit or no, that's also one way to address shareholder concerns.