Last week, I reported on the possible over valuation of solar energy stocks. First Solar (FSLR) was trading at 491 times earnings, while SunPower (SPWR) was trading at 182 times earnings. Quite inflated! In today's New York Times, comes a solar story with more evidence that the psychology of solar is trumping fundamentals:
"The trade association for the nuclear power industry recently asked 1,000 Americans what energy source they thought would be used most for generating electricity in 15 years. The top choice? Not nuclear plants, or coal or natural gas. The winner was the sun, cited by 27 percent of those polled."
"...some of the most ardent experts and investors say that moving this energy source from niche to mainstream — last year it provided less than 0.01 percent of the country’s electricity supply — is unlikely without significant technological breakthroughs. And given the current scale of research in private and government laboratories, that is not expected to happen anytime soon."
Even by the year 2030, the government expects solar energy to account for a tenth of a percent. Of course, plenty can change over that period, but the fact that most experts are pessimistic should hold plenty of weight.
The only question now is when will we see the correction in stock prices?
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4 comments:
I saw that Times article at lunch today. Though I agree that prices are high right now, I'd also suggest that this member of the Bush Admin is not believable.
The industry is growning like mad, and it's not just in the price of stock. Of course, we'll see what earnings look like soon... i'm particularly waiting on earnings from SPWR; but in any case, I'll wager that we beat this guy's expectations by at least 10% in the given timeframe.
D - I could agree with that. In fact, I hope you're right. The current administration has always been anti-anything that's good for the environment. What do you expect from a Texas oil snake?
Current government funding levels for R&D total $159M for solar, compared to $303M for nuclear and $427M for coal. It's possible that a new administration could change that, but the solar companies clout in DC is far surpassed by that of other alternative energy sectors, not to mention the traditional oil industry.
As for SunPower, I think they release second quarter numbers on the 19th. It will be an interesting read.
Honestly, I'm not counting on the Federal Government to save the day (though at this point, the individual States are obviously critical supporters).
Ok, so I don't know exactly how it will go, but one of the things that I'm predicting, based on hope, and also what I think to be good sense, is that the market is going to do alot of the work for us. Perceptions are changing pretty dramatically, as are the economics.
Prices will come down, efficiencies will be realized, and evidence of successful use of solar energy will become more common. At some point, the Financials will get into the act, and recognize the value of property that generates power. Right now, appraisers often don't know how to value a residential solar installation; wait until a residential investor can soundly calculate the value of an installation on a property, and wait until lenders are selling energy loans as enthusiastically as they do auto or home loans; and then we'll see a boom in demand.
I'd say that more important than Federal Funding will be Federal Regulation dealing with standards, such as technical and safety standards, as well as standards that give individuals some basis to believe that they'll get fair treatment by utilities.
In any case, in the residential market, FSLR is totally missing, as their panels are cheap to make, but very ineffient per unit area. It definately appears that SPWR is a leader in terms of effiency by area, and thin film competition in this area is far off.
Anyway, just a thought or two. :)
Your thoughts are always appreciated. It's how I continually learn, which is the point of my blog. And you have me excited to see what SunPower's earnings will look like when they're released, I think on the 19th.
Thanks for your posts.
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