Solar power equipment makers are about to hit a rough patch, and it's time to sell many stocks in the space, according to Goldman Sachs.
Demand for solar power equipment is drying up in key markets just as supplies are booming, the investment bank warns. The industry has long been governed by boom-and-bust cycles, and Goldman thinks a looming glut of solar modules is pushing the sector into a downturn.
"Against this backdrop, we see both volume and pricing risk intensifying in the near-to-medium term, and now forecast 0% average upside across the group," Goldman said in a research note.
The catalyst for its downbeat view is last week's major policy shift in China. Beijing has suspended subsidies for large-scale solar farms for the remainder of 2018 and will require these plants to set power prices in competitive auctions.
Goldman now expects a 40-percent drop in sales volumes in China, which accounts for half of the global market for solar modules and other equipment. Heaping more pressure on the industry are anticipated declines in other key markets like Japan, India and the United States, where the Trump administration has dented demand by slapping tariffs on imported solar panels and modules.