Brighter Skys Ahead for Solar Industry?

LDK Solar Co., Ltd. (LDK), RenaSolar Ltd. (SOL), JA Solar Holdings Co., Ltd. (JASO), and other solar stocks reported lower-than-expected earnings for the second quarter amid an oversupply of polysilicon and a reduction in subsidies by governments around the globe.

Solar Industry Faces Challenges

The solar industry faces several challenges as government subsidies were cut in key markets and an oversupply of raw materials flooded the market. The price of solar panels has fallen by nearly 40% from their highs last year, as tons of production has come online in countries like China just when demand has begun to tighten due to the impact of the global economic crisis.

Spain, one of the largest solar consumers in the world, capped its subsidies on solar panel installation at 0.5GW after installations hit 2.67GW last year, which put a major damper on its new orders. While a new German subsidy helped partially offset the amount, it was not enough to offset the lower demand in Spain, according to industry analysts.

Recent Q2 Solar Industry Earnings in Brief

LDK Solar Co., Ltd. [[LDK]] reported a second quarter loss of $2.03 per share on revenues that fell 48% to $228.3 million compared to a year ago. For the third quarter, the company issued revenue guidance of $240-270 million, wafer shipments between 260-300MW, module shipments between 10-20MW, which were well below analyst estimates.

ReneSola Ltd. [[SOL]] reported a second quarter loss of $0.03 per share on revenues that fell by 52% to $82.6 million compared to a year ago. Looking ahead, the company expects to see revenues jump 60-70% in the third quarter sequentially, as it looks forward to a rebound during the second half of the year.

JA Solar Holdings Co., Ltd. [[JASO]] reported a second quarter loss of $0.18 per share on revenues that dropped more than 50% to $88 million compared to a year ago. Looking ahead, the company sees “significant signs of market improvement” in both end-market demand and financing, anticipating that their cost-structure and customer relationships would drive results.

Brighter Skies Ahead?

Despite the gloom, many analysts are confident that an oversupply in raw materials will be good for the industry long-term. With prices that are more competitive with traditional energy sources, analysts see an increase in consumer adoption and continued political support. In fact, many investors and analysts believe that demand could rebound as early as 2010.