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Analyst: Dim Outlook For Solar Sector In 2020

Tyree Gorges

As the sun goes away, so does the optimism for the solar sector. Even before the year is over, it appears that 2020 will be rough for some alternative energy companies.  

What Happened

Longi Solar, a manufacturer of monocrystalline solar cells and modules, reported third-quarter results last week that did not meet expectations.

The China-traded company traded lower, as preliminary earnings were 10% below the consensus estimate at the midpoint, according to GLJ Research.

"In short, based on our checks this morning in China, we believe weaker-than-expected module shipments are likely the reason for Longi's (large) 3Q19 earnings miss," GLJ Research's Gordon Johnson said in an Oct. 16 note.

"Our contacts in China believe Longi may indeed miss its full-year 2019 module shipment guidance target."

In addition to Longi Solar's disappointing results, other solar companies are going through troubling times; Sunrun is having trouble hiring to meet demand, Johnson said. 

Why It Matters

Solar demand in China in the fourth quarter and 2020 will disappoint, the analyst said. 

With 46% of global solar demand coming from China, this could spell bad news for the sector.

Along with potentially weak demand next year, another X factor is the relationship between the United States and China.

Even if demand in China stays strong, will the solar sector feel the heat if the relationship between the two countries further deteriorates? 

What's Next

Keep an eye out for news around the ongoing trade war between the United States and China. In addition, Congress will soon vote on a bill that shows support for pro-democracy protestors in Hong Kong.

China has promised countermeasures if the bill is passed. The increased uncertainty around the relationship between the two countries may ultimately end up impacting solar stocks. 

Stocks Of Interest

  • Sunrun Inc (NASDAQ: RUN)
  • Enphase Energy Inc (NASDAQ: ENPH)
  • SunPower Corporation (NASDAQ: SPWR)
  • Vivint Solar Inc (NYSE: VSLR)
  • JinkoSolar Holding Co., Ltd. (NYSE: JKS)

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