Evergreen Solar, Sunpower cut to sell at Merrill on oversupply concerns
By Staff Reporter
LONDON, May 29, 2008 (Thomson Financial via COMTEX) --
Evergreen Solar Inc. and Sunpower were downgraded Thursday to sell from neutral at Merrill Lynch on oversupply concerns linked to possible subsidy cuts in Germany, the U.S. and Spain.
Merrill said it is particularly concerned by the rising number of German politicians advocating a bigger cut to solar subsidies there because of escalating costs.
Germany accounts for about 50% of the solar market and any subsidy cut would weigh heavily, the broker said.
At the same time, the sector is suffering from an "irrationally exuburant" pace of manufacturing capacity expansion, which could lead to significant oversupply and margin pressure.
The broker is concerned by Evergreen's need to raise at least $500 million over the next 12 months. It is also cautious about its cost reduction program.
Sunpower, meanwhile, is building a new manufacturing facility that could also see the company coming to the capital markets to raise cash, the broker said.
"We believe the stock may also come under pressure as a potential Cypress spin-off nears," the broker said. Chipmaker Cypress Semiconductor holds a majority stake in the solar panel maker.
Merrill said it was maintaining its buy rating on First Solar Inc., but cutting its price target to $325 from $360. The company is best positioned to weather any drastic subsidy cuts given its superior cost structure and long-term contracts, the broker said.
U.S. analysts at Merrill said their downgrades of U.S. solar panel makers comes after their counterparts in Europe cut their stance to sell on European solar stocks, Q Cells, Solarworld and Renewable Energy Corp. |
