Gordon Johnson Says Solar PV Fundamentals Are Deteriorating

• Shares of most Solar companies plunged over the past one month.
• Axiom Capital’s Gordon L. Johnson has a Market Underweight rating for the Alternative Energy sector.
• Falling pricing, increasing capacity and declining demand translate to a further deterioration in PV fundamentals, Johnson stated.

Through the current week, average prices for poly, wafers, cells and modules were largely flat w/w across the value chain, analyst Gordon Johnson said.

He further commented that C4Q15 earnings in the sector are unlikely to be a positive catalyst, with Wacker attributing earnings weakness to lower polysilicon prices, poly-Si spot prices down or flat for the last 29 consecutive weeks, module prices down or flat for the last 12 straight weeks, wafer prices remaining flat for the last couple of weeks and cell prices remaining flat for the past 4 weeks.

Johnson added that checks earlier this week suggested “module vendor margins are collapsing due to higher input costs in the form of PV wafers/cells and an inability to pass these higher costs onto customers.”

Referring to the PV fundamentals, the analyst mentioned that they seem to be deteriorating further, especially given:

1. End-market demand in China, Japan and the US taken together, which represented 71 percent of global demand in 2015, is “almost sure to slow” in 2016.
2. The backdrop of ever-increasing capacity expansions.

Ratings

• Sunedison Inc SUNE - Hold
• JA Solar Holdings Co., Ltd. (ADR) JASO - Sell
• Trina Solar Limited (ADR) TSL - Sell
• Yingli Green Energy Holding Co Ltd (ADR) YGE - Sell
• SolarCity Corp SCTY - Sell