Solar stocks...Screaming BUY or Value trap !!!!

Solar stocks have come into focus after stunning earnings from LDK & STP......

LDK & STP are considered the real trend into the future of Solar because of their unique leadership position in the marketplace.......

Margins are still under pressure due to very high Polysilicon cost......there IS hope that we may see a declining prices in polysilicon by middle of 2009 which is the key ingredient for the production of Silicon Wafer which then makes PV cells......this will help the entire solar sector with higher margins and lower cost of PV cells...thus increase in acceptance by the governments & public.....

Solar energy is being encouraged by most 1st tier & 2nd tier countries all over the world...US,Japan & Italy are the new game in town......

So...let us look @ 2009 EPS for most Solar which I follow and see how their PE looks like based on Friday's close :

LDK.......$45.82 12/09 $4.32 PE 10.60
CSIQ......$31.88 12/09 $3.59 PE...8.88
SOL........$18.94 12/09 $2.25 PE...8.42
STP........$46.75 12/09 $2.61 PE 17.91
TSL........$33.17 12/09 $4.25 PE...7.80
JASO......$17.92 12/09 $1.59 PE 11.27
SOLF......$19.75 12/09 $1.17 PE 16.88
YGE........$17.86 12/09 $1.62 PE 11.02
FSLR...$282.82 12/09 $6.89 PE 41.05
SPWR...$96.59 12/09 $3.19 PE 30.28

Only SOLF has not reported Q2 which is coming out on Wed...so their consensus estimates MAY be revised UP after ER......

As you can see some Solar stocks are trading like Utilities where there is NO growth...while Solar Stocks are growing Sales in excess of 100%...

In normal bull market solar would have traded anywhere from half of their growth rate to 100% of their growth rate....check FSLR & SPWR PE ????

It IS safe to predict that Solar stocks will continue to expand their PE as market sentiments improve......

Lot of traders think that Oil prices has a direct link to valuation of Solar stocks.....I beg to disagree completely.....Most solar stocks were much higher when Oil was around $80.....Currently Oil is @ $114 area........Check the Highs on LDK & STP were higher by almost 100% back then

Oil will be range bound in 2008 from $100+ to $130 area....in 2009 I expect Oil to range from $120 to $160 area......these prices are very good for the future of Solar stocks.....

I suggest going with @ least two best ideas in Solar stocks.....You can look @ either Sales growth or EPS growth.....

LDK guidance was superb...STP was a big relief for the solar future business.....

Democratic convention starting from Monday will focus on Alternative Energy in a big way with talk of subsidy & incentive......That should boost Solar stocks !!!!

Good luck with your OWN Solar Analysis...not all Solar stocks are created equal...some ARE screaming buy right now......

BLOG does NOT give buy or sell.

Saleem