Time Is Energy

Markets are clearly not rational

Solar stocks are having a terrible year even as installations of solar go through the roof!

Most market analysts are expecing at least 50% more solar to be installed in 2010 than in 2009. Prices for panels have so far held surprising steady after last year's 40-50% plunge. Now that panel manufacturers are running at high capacity, they are making money again.

Solar stocks are almost universally down this year, some are down substantially...

Take a long time favorite of mine: SPWR (A or B, they have equal claims on equity). In the past the B shares traded at a substantial discount, now the discount is only about 5%.

Today the B shares trade around 11.10/share and the A shares at 11.70/share

On the conference call a week ago, SPWR reported that it has $737 Million in cash and investments at quarter end. That represents ~ $7.40/sh in cash and investments.

The company reiterated FY 2010 earnings guidence of ~1.50 to 1.65/share.

Take the A shares (11.70) and subtract C&I (-7.4) and you get an adjusted value of $4.30/share.

Now take the $4.30 and divide by the lower $1.50/share in earnings and I get a P/E (price/earnings) of less than 3! Less than 3! LESS THAN 3!!! and that was using the expensive shares and the lower earnings number.

Even assuming SPWR can only earning $1/share in 2010 (i.e. misses FY estimates by 1/3) this is still selling for an adjusted P/E of less than 4.5!

Also note that 16 million shares of SPWR are sold short according to Yahoo (i.e. people borrowed shares they did not own and sold them). While that is down over 1 million shares from the prior quarter, I have to ask why are short sellers sitting on shares of an industry leader (in a period of booming demand/installation activity) that is selling for less than an adjusted P/E of 3?

posted by Daniel @ 10:38 AM