Solar stocks drop as UBS downgrades

SIOUX FALLS, S.D. - Shares of several solar companies dropped Tuesday as UBS downgraded the stocks on worries about the effect a global recession and credit crunch on the residential market.

Analyst Stephen Chin cut his rating on San Jose, Calif.-based SunPower Corp. to "Sell" from "Neutral" and lowered his price target to $25 from $56.

SunPower shares fell $4.13, or 11.9 percent, to $30.55 in afternoon trading. The stock has traded between $34 and $164.49 during the past year.

Chin also cut his rating to "Neutral" from "Buy" on Evergreen Solar Inc., Energy Conversion Devices Inc. and GT Solar International Inc.

Energy Conversion shares dropped $2.48, or 8.7 percent, to $25.90, while GT Solar fell 32 cents, or 8.1 percent, to $3.64. Evergreen Solar fell 2 cents to $2.37.

Chin said he expects solar demand in 2008 and 2009 to be between 4.4 gigawatts and 5 gigawatts, down from a previous estimate of 5 gigawatts to 7.3 gigawatts. He attributed much of the drop to a decrease in demand from Germany.

"Our industry research suggests the residential segment in most regions is becoming less elastic in a global recession with difficulty obtaining credit," Chin wrote in a client note.

UBS lowered its 2009 solar module price estimate to $3.01 per watt from a previous estimate of $3.22 per watt. Chin said the adjustment is based on foreign exchange changes related to the euro's decline against the dollar, as most solar modules are sold in euros.

Lazard Capital Markets analyst Sanjay Shrestha said in the U.S., an eight-year extension of investment tax credits is a source of encouragement, but it is not yet bringing down the kilowatt-hour cost to retail grid parity.

Shrestha said the credit crunch could pressure further system cost reductions such as the quality of modules used, as banks are making their underwriting standards stricter.

"The German solar financing market has advanced to creating a secondary market for solar loans, to which other markets are likely to follow, but in light of the current credit crunch the timing of this could be delayed," Shrestha wrote in a client note.

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