Solar Stocks Retreat After Yesterday's China Windfall, Analysts Chime In

Solar stocks are giving back some of yesterday's massive gains which followed news about a new China subsidy for the industry. Broadly the sector is down about 2%, as represented by sector ETFs Claymore/MAC Global Solar Energy (NYSE: TAN) and Market Vectors Solar Energy ETF (NYSE: KWT).

Today, a number of analysts are commenting on yesterday's surge, with most on the sell-side telling clients to use the one-day windfall as a chance to sell. Below are some select comments on the sector and specific stocks:

• Piper Jaffray's Jesse Pichel is a little restrained on the China news and put out a report entitled "Lost in Translation." Pichel said, "We have spoken w/ industry contacts and contacts at the National Development and Reform Commission (NDRC, a dept within the Chinese State Council that formulates policies for social and economic development in China) in charge of energy reduction and development of renewables. Our checks confirm our thesis that 1) the street over reacted 2) its too early to quantify 3) 2010 story." Commenting on stock action, Pichel said SunPower (Nasdaq: SPWRA) and First Solar (Nasdaq: FSLR) could emerge as winners due to a "flight to quality." He said from China he favors Yingli Green (NYSE: YGE) and JA Solar Holdings (Nasdaq: JASO). He said Suntech Power (NYSE: STP) and Yingli Green (NYSE: YGE) are the two best with govt contacts and therefore more likely to win govt subsidized solar projects.
  
  
• Deutsche Bank said "This new stimulus package is clearly a positive, but we believe stocks have over-reacted to the news. Our near-term outlook for the broader solar PV industry remains negatively biased as credit issues drive prices down and inventories up." They also noted the China Ministry of Finance press release could be characterized as a general direction with some details, but is clearly not detailed enough for an accurate assessment of the potential impact to the solar PV industry.
  
  
• Collins Stewart downgraded industry leader First Solar (Nasdaq: FSLR) from Buy to Hold, saying following yesterday's rally, risk/reward is more balanced for investors. With regard to China the firm said, "we do not believe the program in China will meaningfully alter the demand for FSLR product or correct the polysilicon oversupply situation we forecast for CY09 and CY10."
  
  
• Analysts at Gabelli & Co went against the grain and upgraded Suntech Power Holdings Co. Ltd. (NYSE: STP) from Sell to Buy and LDK Solar (NYSE: LDK) from Sell to Hold on the back of China news. The firm said, we believe that the combined government support in the US, Japan, and now China will enable the overall solar industry to absorb excess capacity and potentially grow in 2009.

Friedman Billings also chimed in as reported by Notable Calls.

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