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Sun Might Be Setting On The Entire U.S. Solar Sector

Dark clouds are gathering over the entire solar sector

There has been a lot of fuss recently about the Solyndra debacle. About a year ago, President Barack Obama toured the solar energy company and touted its photovoltaic systems as a perfect example of so-called “cleantech” growth that would create high-tech, high-paying jobs.

Unfortunately — and despite a $535 million loan guarantee from the Department of Energy — Solyndra filed for bankruptcy this month, terminating all 1,100 workers. To make matters worse, the FBI recently raided offices, and now Congressional hearings are revealing very sloppy spending in the wake of Uncle Sam’s endorsement.

We can debate the Solyndra failure as a talking point for the 2012 election another time. What investors really should be concerned with is the dark clouds gathering over the entire solar sector. Just take a look at the performance at some of the biggest names in the solar sector:

Evergreen Solar plummeted to about a dollar in late 2010 as it tried to restructure its debt. Now it trades for about a nickel — after a 1-for-6 split in January — and has been relegated to the pink sheets. That recent flop would be bad enough, but when you consider that shares traded for an adjusted price of $12 or so at this time in 2009, the losses look even uglier. Evergreen filed for bankruptcy in August to try and scrape together the $485 million it owes creditors and soon will disappear forever.

First Solar is the “leader” among pure-play solar stocks in the U.S., with a market capitalization of almost $6 billion. FSLR stock is down 48% since Jan. 1, 2011. The leader by most measures in the industry, First Solar saw its profits slashed by more than half — from $159 million to $61 million – as Europe’s debt woes resulted in subsidies being slashed. Adding insult to injury, Axiom Capital’s Gordon Johnson slashed his price target for the stock from $75 to $35. That’s another 50% decline from here, and barely a tenth of First Solar’s peak share price of $317 in 2008.

Sunpower is next in line among the larger domestic solar players. Its stock has performed “better” than First Solar in 2011, down about 30% in 2011. However, since its peak valuation in 2007 over $130, the stock has flopped almost 95% to under $9 a share as of this writing. Why? Volatile revenue and profit performance makes for a risky bet — and the fact that SPWRA is cruising towards a third-straight quarterly loss has investors leery. What’s more, long-term debt of more than $500 million and total liabilities pushing $1 billion mean there’s not a lot of room for error considering the company’s $900 million market cap. There are serious hurdles to growth, considering the very expensive nature of solar panel manufacturing facilities on top of current debt loads.

Those are three specific stories of three well-known U.S. solar companies — proving Solyndra’s implosion didn’t take place in a vacuum.

Investor Place, 23 September 2011

GOP House chair: US solar industry could collapse

Business Week, 23 September 2011

A Republican House chairman is calling loans to the solar industry a poor bet and says it’s reasonable to predict that the entire solar panel manufacturing business in America could collapse.

The chairman of the House Oversight and Government Reform Committee, California congressman Darrell Issa, is citing competition from China and other problems facing the American solar panel industry.

On Thursday, Issa released a report that says questionable accounting methods have been used to count “green jobs” and calls the term vague and poorly defined.

Issa says a $528 million loan to a now-bankrupt California solar energy company, Solyndra Inc., is just one example of the Obama administration’s failed attempt to create green jobs. He says the loan was driven by appearances of political favoritism.