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Greenberg: One Solar Bear’s Reality Check

As solar stocks continue to fly today in reaction to Japan’s nuclear worries, with the Guggenheim Solar ETF and First Solarserving as good proxies, solar bear Gordon Johnson of Axiom Capital continues to scratch his head.

In a note to clients, he wrote:

While many analysts have made the proclamation that a significant impact to polysilicon prices will result from the earthquake in Japan (i.e., prices will move higher due to polysilicon facilities going offline in Japan), we remind our readers that that key suppliers of polysilicon in Japan consist of: (a.) Tokuyama, (b.) Sumitomo, and (c.) M. Setek.

Combined, these three vendors are expected to produce 17.1K MT of polysilicon in 2011, vs. aggregate supply of 254K MT (i.e., 6.7 percent of the total).

However, when considering Tokuyama’s plant is more than 1,000 miles away from the damaged nuclear plants, we see a low probability that there will be any impact from electrical interruption (Tokuyama is has recently began construction on a new plant, which is located in Malaysia).

Furthermore, while we acknowledge that M. Setek's polysilicon plant is located in Fukushima, which is in Northern Japan, the plant was not damaged and is expected to be shut down for a week (power interruptions, etc). Sumitomo is expected to produce just 2.3K MT of polysilicon this year (i.e., less than percent of aggregate production, or an insignificant volume).

Thus, when considering very limited impact to actual polysilicon production in Japan, we view comments today on a major impact to polysilicon supply as overdone and misplaced.

My take: This is about stock price reactions and the possible disconnect to events in Japan —not the future of solar. That doesn't mean the 'Hostile React-O-Meter' won't spin out of control. Onward.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

Follow Herb on Twitter: @herbgreenberg

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