Long-Time Bear On Why Solar Demand In '16 Could Be 'Worse Than Imagined'

• While shares of Sunedison Inc SUNE, JA Solar Holdings Co., Ltd. (ADR) JASO, Trina Solar Limited (ADR) TSL and SolarCity Corp SCTY have gained significantly over the past one month, Yingli Green Energy Holding Co Ltd (ADR) YGE shares are down.
• Axiom’s Gordon L. Johnson II has Sell ratings on all the companies.
• The world’s top-3 solar markets could witness a y/y decline in PV demand in 2016, Johnson said.

Analyst Gordon Johnson mentioned that global PV demand could be “worse than imagined” in 2016. The reasons cited were:

1. China’s National Energy Administration, or NEA, has projected the 2016 PV installation target at 15GW, representing a 15.7 percent decline from the 2015 target of 17.8GW. China is the world’s largest market by far.
2. Japan, which is the world’s second largest market, witnessed a y/y contraction in installations for the first time ever in August. Japan installed about 70MW of residential PV and around 580MW of non-residential PV in August, which means a combined 770MW, implying a decline of 15.6 percent m/m and of 5.8 percent y/y.

“Thus, given our view that Japan’s + China’s + U.S. installations are likely to fall in ’16 (i.e., the top-3 solar markets that together comprise ~70% of global demand in ’15, according to our prop. supply/demand model), amid structurally widening oversupply of PV modules (i.e., our work points to an incremental ~10GW of planned capacity in ’16), we see imminent downside risk to PV prices in 1H16.” Johnson wrote.