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Outlook Positive: Solar Stock Puts In A Bottom



September 21, 2011 – Comments (0) | RELATED TICKERS: TSL , JASO , SPWRA.DL

Solar stocks have been pounded due to many factors, however, there is light and profits at the end of this tunnel. First, the price of solar panels being sold to the public has plummeted. This is due to an oversupply coming from China and all over the world, along with better technology to make them cheaper. In addition, as Europe crumbles, austerity measures are causing major cuts in subsidies to alternate energy. Europe has been the leading spender on solar power.

Having said all this, solar stocks may be a great buy at current levels. Bad news has been priced in at this point. Solar companies are trading at very reasonable P/E's. In addition, First Solar, Inc. (NASDAQ:FSLR) reversed off its master 2007 support point. It now has a bottoming tail on the daily chart and is trading at a future P/E of under 10.

Solar has been in the news lately in a negative light. Solyndra's bankruptcy filing was a pet project of President Obama. This has become somewhat of a sore spot for the current administration. While this seems like a negative for solar, it tells smart traders that companies are exiting the field. Only the strong will survive and margins may start to increase again.

The key to the solar sector buying opportunity is to view the current valuation. Stocks like SunPower Corporation (NASDAQ:SPWRA), Trina Solar Limited (ADR) (NYSE:TSL), JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) are all trading at levels that make them attractive. With First Solar's bottoming tail reversal off a master level from 2007, it gives even more confidence to the trade. Factor the weak players are exiting and you have a recipe for profits from investment. These low stock prices may not last long.

Gareth Soloway

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