Investors Really Get Hot And Bothered Over Solar Power

from the sunburned dept

Tue, Jul 10th 2007 6:43am — Joseph Weisenthal

As we noted last week, one of the hottest sectors on Wall Street these days is the solar energy business. Chinese solar power companies alone have raked in over $1.1 billion so far this year through IPOs. It's starting to look like investors are going a bit crazy over these companies, as solar shares rallied hard across the board, following a few deal announcements. It's common for customer win announcements to be catalysts for an upward stock move, but there's something a bit disturbing about the way that so many solar companies moved sharply higher yesterday. Basically, what it means is that investors are being indiscriminate about what they're buying. This, more than the spate of IPOs, is a worrisome sign, since it looks a lot like a buying panic, the type commonly seen near the top of bubbles. One day's action doesn't make a bubble, but if you see more of these days, where every company in a sector moves in perfect concert, then it should be seen as a warning sign.

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Filed Under: china, ipos, solar

11 Comments

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Egat, 10 Jul 2007 @ 8:13am

Why Buy?
Really, why buy into an industry that's young, but profitable and provides a clean renewable source of energy in an increasingly power-hungry world?

Do you have any reasoning for screaming "BUBBLE!!!" besides your perpetual pessimism? The solar runup is not based on some bubble of speculation, but real increases in the efficiency, aesthetics and usability of solar panels for both consumer and corporate applications. The companies have real innovative products that are in production and on the market and making a healthy profit.
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Logan, 10 Jul 2007 @ 8:27am

Re: Why Buy?
He isn't screaming bubble because he's paranoid, he is screaming bubble because every company, even the fake ones set up to make a quick buck on the stockmarket, are shooting up.

When investors don't even look at the companies they are buying into bad things are on the rise.
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Ferin, 10 Jul 2007 @ 8:34am

Maybe not so crazy
There's a company up in Toledo, Ohio that's the second largest solar panel producer in the US. 90% of their sales are going to Germany, and business is going so well their talking about putting a sales office or even a new factory over there.
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andrew, 10 Jul 2007 @ 8:49am

shortage
Probably similar to ethanol stocks last year. there just aren't enough companies to satisfy the demand for investors. ethanol stocks cooled off after quite a few companies went public, but they are back now.
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Overcast, 10 Jul 2007 @ 8:50am

If they can bring down the cost of Solar Power equipment - the business would really boom. It's just far too pricey right now
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mark, 10 Jul 2007 @ 9:30am

Solar and wind energy would look a lot better if traditional energy sources like coal and petroleum doubled in price again. Instead of TV antennas we might see wind generators and solar panels on most roofs someday. I don't intend to wait, preferring to have it in place so when oil shoots up, I can sit back with a $hit eating "I told you so" grin on my face.
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Chris Maresca, 10 Jul 2007 @ 9:49am

Largest solar plant in the US
A friend of mine just put together a deal to build the largest solar plant in the US, 80MW.

http://www.cleantechamerica.com/projects/

Projects like this require huge amounts of capital, so it's not surprising to see a large influx of cash into this field. Also, let's keep in mind that the role of VC's and other early stage investors is to take risks, part of that risk being the risk of setting up a new industry. And it's only really worth taking the risk if there is a high reward..

Part of the issue here is that SarBox has killed of the IPO market for small issues (under $100 million), a market which would traditionally include a lot of software companies. So investors have been looking to invest in industries which can command larger issues. With solar requiring large capital investments, it's a perfect target.

Besides, there is a huge public policy shift right now, one which is enabling a whole new industry. With the total energy market in the US alone around $200 billion, it makes sense to invest heavily when policy moves the goalposts...

Chris.
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J.R., 10 Jul 2007 @ 2:37pm

Solar IS more affordable
Photovoltaics have become more efficient; Grid-tie inverters have removed the need / cost of large battery banks; and the US energy market is at the cusp of change. Clearly, now is the time to invest in solar in all its incarnations.
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Luci, 10 Jul 2007 @ 4:30pm

Re: Maybe not so crazy
That would be Solar Fields, LLC, in Perrysburg, and First Solar, their manufacturing plant, also in Perrysburg. Yes, I'm in Toledo, Oh. The university, here, has been playing with solar power for some time, now.
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Anonymous Coward, 10 Jul 2007 @ 7:07pm

it's not about solar energy
Joe is only talking about stock prices - in general - using his citation as (just) an example.

The other point to think about - in general - is how little the price of any stock has to do with the real value of the company.

Stock prices are pumped and dumped in many ways.
The Dow is up/down a point in early trading - meaningless. It's an average of 30 of the biggest companies. What does that mean to you on an hourly basis? Nada - but you hear it that often on the radio.

and on and on
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Paul, 2 Aug 2007 @ 10:40pm

Solar Bubble?
I think you might need to look at the politcal trends reguarding solar energy. Not to mention energy economics in general. Since California and other states are in various stages of mandateing installation of solar panels in residential and commercail buildings, I think it would be a serious missed oportunity to not invest in solar. If the bubble breaks, so what. It will reinflate again and again. Just profit takeing for the most part. Sure some companies will make it some won't. Take about two weeks of your time and find at least 20 companies in the this sector. They are there. Research them from top to bottom. Their web sites, financials, products, management, r&d, sales everything. Write your own thesis about it. I guarantee you will have a new outlook about it. Solar go real long!!!!!!!!!!!!!!!!!
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