Gordon Johnson's Solar Stock Universe Is Yelling Sell, Sell, Sell

Donald Trump
has never shied away from offering glimpses of what his energy policy would look like.

Gordon Johnson, a notable solar analyst, cited the U.S. election results as one of a small handful of reasons why he downgraded the entire solar sector to Market Underweight with a Sell rating on all 10 stocks he covers in the sector.

Trump's Policies Aren't Favorable For Solar

Johnson noted that solar power is still quite expensive when factoring in the cost of providing electricity when the sun is not shining, which explains why government incentives are necessary for solar companies.

A Trump administration could signal to the world that solar is no longer a priority, given the following four reasons:

    1. Trump tapped Myron Ebell, a climate change skeptic, to head his EPA transition team.
    2. Trump plans on scrapping the Clean Power Plan.
    3. Trump plans on repealing all federal spending on clean energy.
    4. Trump wants to remove the United States from the Paris Climate Deal.

China's Top-Runner Program

China's top-runner program is designed to improve technology through higher efficiency panels inside China and is set up as a reverse auction structure. Chinese module vendors submit bids, and the lowest bid wins the project. Some of the submitted bids came in as low as $0.459/W, which compares to Tier 1 manufacturers' all-in production costs in a range of $0.43 to $0.46/W.

As such, the company that submitted a $0.459/W bid will likely lose money on the net income line, especially when factoring in OPEX and interest expenses.

Chinese Firms Are Artificially Boosting Prices

Johnson noted that several large Chinese vendors recently decided to take their capacity offline for maintenance purposes in October, which artificially adds price appreciation.

The analyst suggested the move was decided after 19 consecutive weeks of poly-Si price declines — or perhaps due to price collusion in China.

Sell Ratings Across The Board

Johnson downgraded the following stocks to Buy from Sell in his latest research note:

  • GCL-Poly Energy Holdings Limited. (HKG: 3800) GCPEF.
  • JA Solar Holdings Co., Ltd. (ADR) JASO.
  • Meyer Burger Technology AG MBTN MYBUF.
  • Trina Solar Limited (ADR) TSL.
  • Yingli Green Energy Holding Co Ltd (ADR) YGE.

The analyst downgraded the following stocks to Sell from Hold:

  • Neo Solar Power Corp. (TPE:3576).
  • SolarCity.

The analyst reiterated a Sell rating on the following stocks:

  • SMA Solar Technology AG (ETR: S92) SMTGF.
  • Solaredge Technologies Inc SEDG.
  • Sunedison Inc SUNEQ.
Posted In: 2016 presidential electionaxiomChinaClean Power PlanDonald TrumpEPAGordon JohnsonMyron EbellParis Climate DealSolarsolar energySolar PowerAnalyst ColorShort IdeasEmerging MarketsDowngradesCommoditiesPoliticsReiterationGlobalMarketsAnalyst RatingsMoversTrading IdeasGeneral