Solar stocks fluctuating on market uncertainty

Most major players in the solar industry have seen their share prices drop dramatically over the last few weeks since they were riding high on excellent 2010 fourth quarter earnings statements.

SunPower (SPWRA), LDK Solar (LDK), Suntech Power (STP), GT Solar (SOLR), RenSola (SOL) and others all fell Tuesday, dipping closer to the low prices they started 2011 at. Yet, some companies like First Solar (FSLR), saw its share price rise some Tuesday.

Investors should expect to see a lot of fluctuation in the solar stocks over the next few months, said Adam Krop, vice president of equity research at Ardour Capital Investments.

"There continues to be a lot of volatility in the space right now," Krop said. "That's really being driven by subsidy chatter."

Italy is expected to make changes to its subsidy structure in April, which is impacting the solar market pretty heavily right now.

"Italy is the second largest market in the world," Krop said. "Banks are still waiting for more clarification on where feed-in-tariff levels will go."

Uncertainty about subsidy programs cause the banks that finance these large-scale solar projects to get a bit skittish, which could cause a temporary disruption in volume, Krop said.

As a result of all this uncertainty in the market, there’s a lot of uncertainty for investors, Krop said.

Of course, there is another possible explanation for these big fluctuations in and drops in solar stock prices.

"From the first of the year through February, the Ardour Capital Solar Index was up 18 percent. That's over three times the performance of the NASDAQ," Krop said.

Since they were high, they might have been due for a correction.

Most fourth quarter earnings statements were strong, which caused the stocks to go up.

First quarter statements will be coming out in another six weeks and will probably also be strong due to demand in Italy and the U.S. But they may not be strong enough to make up for the uncertainty from changing subsidies, Krop said.

"I think the long-term volume trend is positive. But don't be surprised if you see these solar stocks 10 to 15 percent in either direction over a period of a couple weeks with adjustments in subsidy structures."