Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Yingli Green Energy Hold. Co. Ltd. (ADR) (YGE), First Solar, Inc. (FSLR), SunPower Corporation (SPWR): The European Party Is Over

Page 1 of 2

Forward thinking European nations like Germany and Spain have paved the way in developing solar power. The problem is that recessions and massive unemployment have a habit of stopping government subsidies. Investor confidence in the Spanish clean energy projects has been destroyed after the government announced it would retroactively cut subsidies. Germany recently stated it would pull the plug on its subsidies by 2018. Now, a number of solar manufacturers will feel the pain from these cuts.

SPWR Total Return Price data by YCharts

Look at China

Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) is a powerful Chinese solar manufacture, and its European prospects are falling. The European Union is looking to slap tariffs on Chinese panels. In 2013 the company expects German shipments to fall to 20% of all shipments, down from 23% in Q4 2012. Import tariffs or export caps coupled with falling subsidies will affect China’s Trina Solar Limited (ADR) (NYSE:TSL) as well. In 2013 Germany is expected to record just 19% of its sales, down from 33.1% in 2012.

Yingli Green Energy Hold. Co. Ltd. (ADR)

Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE)’s finances are already on weak footing. Europe will only push the company further into the red. Yingli’s balance sheet is full of debt with a total debt to equity ratio of 8.68 and a current ratio of 0.8. Low costs simply are not enough. In Q1 2013, its overall non-silicon cost fell to $0.47 per watt, and its overall silicon cost fell to $0.13 per watt, but its gross margin was just 4.1%.

Trina Solar Limited (ADR) (NYSE:TSL) is in a better position than Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE), but not by much. Trina Solar is stuck with a Q1 2013 overall gross margin of 1.7% and an operating margin of -15.4%. The good news is that its total debt to equity ratio of 1.59 is manageable.

The Other Side of the Coin

While China is stuck in the middle of Europe’s mess, American manufacturers like First Solar, Inc. (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR) are a different story. Around two thirds of First Solar, Inc. (NASDAQ:FSLR)’s potential booking opportunities are found in North America and Latin America. The rest of its opportunities are focused in the Asia Pacific region and the Middle East. Europe already plays a relatively small role in the company, and Europe’s falling subsidies will have a comparatively small impact.

SunPower Corporation (NASDAQ:SPWR) is focused on North America and it is poised to grow, as more of America reaches grid parity. In Q1 2013, it generated $423.3 million in revenue from the Americas, while Europe, Middle East, and Africa generated $68.7 million in revenue. In the past the company has been criticized for being overly focused on the Americas, but now this strategy is paying off.

The Financials

Not only will Europe have little impact on First Solar, Inc. (NASDAQ:FSLR), the company is already on strong financial footing. Its return on investment (ROI) of 9.9%, gross margin of 32.9% and profit margin of 11.4% place it profitable territory. Its debt is almost non-existent with a total debt to equity ratio of 0.15.

SunPower Corporation (NASDAQ:SPWR)’s financials are not as strong as First Solar, Inc. (NASDAQ:FSLR)’s, but the company is working to improve its situation. Its gross margin of 14.6% shows that it has more pricing power than many Chinese manufacturers, but its ROI of -22.7% and profit margin of -13.3% need to improve. Thankfully, its partnerships with the Japanese firms Toshiba and Sharp have allowed it to gain a strong foothold in Japan.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!