A 7% decline in First Solar (NasdaqGS: FSLR) shares will rain on exchange traded funds (ETFs) that invest in solar energy on Wednesday after the top holding reported earnings and released a disappointing outlook.
First Solar is the largest holding in Guggenheim Solar ETF (NYSEArca: TAN) and Market Vectors Solar Energy ETF (NSYEArca: KWT).
“In the face of escalating concerns surrounding the impact subsidy policy changes in Italy and France are having on solar demand, inventories, and pricing, First Solar may have offered some solace in better-than-expected first-quarter results but also likely fanned the flames of worry with falling margins and an uninspiring second-quarter outlook,” said Hapoalim Securities in a note.
Solar ETFs got a boost recently when French energy giant Total said it would purchase up to 60% of SunPower (NasdaqGS: SPWRA) for about $1.4 billion. The offer at a big premium “is a validation for the solar sector and confirms the notion that valuations are compelling,” Jefferies analysts said in a note when the deal was announced in late April
The sector ETFs can see big swings and volatility. “Given its extremely narrow focus, this thematic fund should be treated as a satellite specialty holding to complement a diversified portfolio, albeit one that may be held for several consecutive years,” said Morningstar’s Abraham Bailin in a recent analyst report on Guggenheim Solar ETF.
The solar-energy ETF is up about 15% year to date.
Guggenheim Solar ETF
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