Goldman Turns Cautious on Solar Sector
Source: Seeking Alpha, Eric Savitz (10/7/08)
Solar stocks traded sharply lower Tuesday morning after Goldman Sachs analyst Michael Molnar declared he has become cautious on the solar group, “as less generous subsidies combined with a wave of supply pose a real risk.”
Molnar asserts in a research note that the risk of oversupply in the solar market “will soon become a reality as considerably less generous demand subsidies take hold just as a wave of supply and tight financing hit the market.” He thinks that “liberal subsidies of the past in markets like Germany and Spain are unlikely to be replicated in the future given fears of their ultimate cost in a bad world economy.”
As supply increases, he contends, prices will have to “adjust strongly downward to generate demand.” He thinks that trend will lead to below-consensus estimates for module manufacturers and compressed valuations for stocks in the sector.