Expect 'Intense Pressure' On These Solar Stocks

On Wednesday and Thursday, JinkoSolar Holding Co., Ltd. JKS recovered all of its initial post-earnings losses, but Axiom analyst Gordon Johnson says Jinko and other solar vendors with exposure to the Chinese module market have plenty more pain on the horizon.

Johnson says Jinko’s shrinking margins are a sign of things to come for a handful of other solar stocks. According to Johnson, solar vendor margins became artificially inflated when vendors took advantage of the YieldCo craze by selling projects to themselves at high margins.

In the past 53 weeks, the decline in module prices has been larger than the decline in polysilicon prices just 22 percent of the time for Chinese module vendors, suggesting major margin pressures ahead. Johnson says this phenomenon has been going on for years, but the YieldCo model helped companies to transcend the actual market pricing trends and support their margins.

As a result, Johnson says the true margins of Chinese solar module vendors are about to be exposed, and the market will likely not be happy.

“Given this [view] is not Consensus at present, as this dynamic unfolds, we believe those vendors who are the most exposed to selling Chinese-made solar modules to third parties will come under intense pressure,” Johnson wrote.

In addition to Jinko, Johnson says JA Solar Holdings Co., Ltd. (ADR)JASO, Hanwha Q Cells Co Ltd –ADR HQCL and Yingli Green Energy Holding Co Ltd (ADR) YGE are the most at-risk of margin compression.

Last week, Johnson reiterated Sell ratings on JA Solar, Yingli Green Energy and Solaredge Technologies Inc SEDG

Related Link: Expert: It's Time To Short Some Of Your Solar Stocks, Beginning With JA Solar

Posted In: axiomGordon JohnsonAnalyst ColorShort IdeasCommoditiesReiterationMarketsAnalyst RatingsTechTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.