Solar Stocks Fall as Analysts Predict Oversupply, Falling Prices

Solar energy stocks fell today as analysts said that cuts to incentive programs in Europe may drive down prices and demand for panels that convert sunlight into electricity.

Energy Conversion Devices Inc. (ENER) fell as much as 29 percent, the most in almost two years, in Nasdaq Stock Market trading. The Auburn Hills, Michigan-based company announced yesterday that it would cut production to 25 megawatts in the current quarter following changes to incentive programs in France and Italy. The company received more than half of its sales in Europe in the fiscal year that ended in June.

JA Solar Holdings Co., a Shanghai-based solar panel maker, fell 28 cents, or 4.3 percent, to $6.30 at 2:36 p.m. Xinyu, China-based LDK Solar Co. dropped 35 cents, or 3.2 percent, to $10.60, and Wuxi, China-based Suntech Power Holdings Co. declined 5 percent to $8.05.

Christopher Blansett, an analyst in San Francisco with JP Morgan Securities LLC, said in a research note today that Energy Conversion’s announcement is “likely to become a recurring theme for solar stocks.” He maintained his “underweight” recommendation on the company’s shares.

Blansett downgraded Evergreen Solar Inc. (ESLR) to “underweight” from “neutral.” The Marlboro, Massachusetts-based solar company is moving its manufacturing to China, and he said it won’t “be able to reach a sufficient level of profitability before depleting its current cash position,” in part because the photovoltaic solar market will be “significantly oversupplied” in 2011.

Evergreen fell as much as 11 percent today to $1.65, its largest intraday decline since Jan. 3.

More Preannouncements

Satya Kumar, an analyst with Credit Suisse Holdings USA Inc., said in a research note today that the reasons behind Energy Conversion’s cutbacks “make us believe the incident is not isolated, and there could well be more negative preannouncements to come from other companies.”

Kumar said solar supplies are “growing sharply” and “2011 will see significant panel price declines.”

Gabelli & Co. fund manager John Segrich said he shorted JA Solar and Power-One Inc. (PWER), anticipating that the changing incentives in Europe will lead to a glut of solar panels.

Camarillo, California-based Power One makes inverters for solar systems. It fell 7.8 percent to $7.20.

Sanjay Shrestha, an analyst with Lazard Capital Markets, downgraded both JA Solar and LDK Solar to “hold” from “buy” today, and said that solar panel prices will fall this year.

JA Solar announced yesterday plans to build a factory that will have annual production capacity of 3 gigawatts.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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