“The Ardour Solar Index ticked up 4 percent despite uninspiring third quarter financial results,” said Adam Krop, vice president of equity research for Ardour Capital Investments. “We believe the recent rebound in solar stocks is being driven by optimism surrounding volume growth in China and the U.S.”
When solar stocks nosedived at the end of 2011 and beginning of 2012 it was because of a global oversupply that put downward pressure on solar module prices and squeezed manufacturers’ margins.
Even with the 4 percent uptick, Krop said the index is down 44 percent to date, largely due to those shrinking margins and trade war activity.
As global demand increases, it could ease some of the pressure on solar panel manufacturers, who have been concentrating hard on bringing down costs over the last year and a half.
“From a global perspective, we expect about 15 percent global volume growth to be realized in 2012, on top of a strong year in 2011,” Krop said.
He said the United States is on track to see 60 percent volume growth in 2012 and projections have the market growing another 40 percent in 2013.
“China is on track to more than double annual installations in 2012 and double again in 2013 given additional subsidy support recently announced in the region,” Krop said. “This performance will likely make China the largest solar market in 2013, surpassing perennial industry leader, Germany.”
Globally, Krop said Ardour expects to see 35 gigawatts of new solar installed in 2013 on top of about 31 gigawatts installed in 2012.
“However, pricing pressure will continue to impact near-term financial results,” Krop said.
While it sounds like 2013 is shaping up to be another struggle for manufacturers, downstream solar companies are poised for positive growth.
SolarCity, a California company that provides solar as a service by leasing rooftop systems to homeowners, had an initial public offering in December and was selling at $12.16 a share Thursday morning.
“SCTY offers a way for investors to have exposure to volume growth in the solar business that minimizes supply and demand-related pricing risk as volumes should continue to benefit from lower module prices,” Krop said. “That said … the Company needs robust revenue and scale to maintain its lofty valuation, and will likely need some time to reach profitability as its customer count and installed base grows.”