ETFs pegged to solar energy companies rallied nearly 10% on Wednesday on reports China will spend more money to support the battered sector, and an analyst upgrade.
“Chinese solar stocks shot up on Wednesday after reports indicated that the Asian country had taken steps to further its support for the ailing industry,” Reuters reports.
Guggenheim Solar ETF (NYSEArca: TAN) jumped 9.8% in afternoon trading while Market Vectors Solar Energy ETF (NYSEArca: KWT) rose 7.8%. [ETF Spotlight: Solar Energy]
In other sector news, analysts at Susquehanna boosted their price target on First Solar (NasdaqGS: FSLR), reports Schaeffer’s Investment Research. “The shares have also outperformed the broader S&P 500 Index (SPX) by nearly 40 percentage points during the past 40 days,” it said. “Nevertheless, bearish speculation remains alive and well on FSLR. Short interest accounts for a whopping 44% of the equity’s available float.”
“Buoying the company’s soaring share price is a long list of major projects backed by strong industry tailwinds that suggest the solar sector could be making up some lost ground,” adds Wall St. Cheat Sheet.
Yet JP Morgan cautions investors should avoid First Solar in 2013. “We see the issues currently plaguing the Solar PV industry—significant overcapacity and declining demand in Europe, which historically has been the largest market—continuing in 2013,” said JP Morgan analyst Christopher Blansett, according to a Business Insider report. “Unless there is a significant increase in North American natural gas pricing, which seems unlikely given continued productivity improvements of shale-based wells, solar PV stocks are likely to remain out of favor with investors in 2013.”
The two solar ETFs have been lackluster performers in 2012 with losses of more than 35% heading into Wednesday’s rally.
The sector’s boost Wednesday was also driven by a 21% ramp in shares of LDK Solar (NYSE: LDK). The company said it has “entered into discussions with certain creditors to obtain additional flexibility with respect to the terms and conditions of our existing offshore indebtedness.” The firm has engaged Citigroup to assist it in the process.
Guggenheim Solar ETF