The sun is setting on solar energy companies, at least if you ask J.P.Morgan, which has downgraded several businesses in the sector.
Christopher Blansett, analyst with J.P.Morgan, said in a note to clients Tuesday that demand for solar installations around the world will decline in the second half of 2010.
"Our updated global solar demand model calls for about 7.5 gigawatts of installations in 2010 with our work suggesting 4.5GW of this coming in the first half of the year … As solar stocks have historically traded in-line with volume demand, we view this as a particularly negative indicator for the group," he said.
He also warned that companies were aggressively expanding capacity to chase market share, which could lead to an oversupply of as much as 3-4GW.
Instead, Mr. Blansett recommends long investors look into LED and wind sectors, which have "better underlying fundamentals" over the next year.
After reviewing the sector, Mr. Blansett has downgraded First Solar Inc. and Energy Conversion Devices Inc. to Underweight from Neutral, and Evergreen Solar Inc. to Neutral from Overweight.
He's also slashed the price target for First Solar to US$85 from US$140, Energy Conversion Devices to US$6 from US$15, and withdrawn the US$5 target for Evergreen without posting a replacement figure.
Mr. Blansett maintains a Neutral rating on Ascent Solar Technologies (to US$5 from US$9.50), an Underweight on MEMC Electronics Materials (US$12), and an Overweight on Applied Materials, Inc. ($16).