Cowan Analyst Asks “How Low Can They Go” Referring to Solar Sector

Oct 08, 2008
Author: SCP Editor

October 8, 2008 – Cowan and Company solar analyst Robert Stone penned a research note this morning discussing the industry outlook for solar. Here are his conclusions:

· Solar stocks are demonstrating very low PEG ratios. Acknowledging that 2009E earnings are a bit uncertain, he said that estimates may come down, but a “no growth” scenario is unlikely.

· Investors may be concerned about whether governments, who are facing huge liquidity issues right now, will be solvent enough to continue provide the tax incentives and subsidies necessary for continued growth in the sector. He noted that both Obama and McCain’s comments from last night’s debate indicate that the commitment is still firmly in place for renewables. He added that in many countries, funding for PV is collected and disbursed via utilities, not through a central government budget.

· There is also a concern about Chinese PV companies’ relatively greater use of short-term debt to fund working capital. He said he doesn’t see this as a significant risk, and that the common practice for local RMB-denominated lines is to fix an annual rate that doesn’t float with LIBOR.