Whoa! These 3 Stocks Are Shining Bright: SunPower Corporation (SPWR) and More

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As The Motley Fool’s Travis Hoium points out, Citigroup, Cantor, and Bank of America/Merrill Lynch have also given the green light to investors to pile into solar stocks, and apparently they chose yesterday as the day to do so.

I’m not so confident. The industry is still beset by an inventory glut, falling polysilicon prices (though analysts say they’ve bottomed), and a slowdown in project sales. While Power-One reported quarterly results two weeks ago showing a 23% increase in shipments of inverters, they were still less than it had originally anticipated because of materially worse demand in Europe. Earlier, SunPower issued equally gloomy results.

Even the Raymond James analyst admits the inverter market is a tough place to be right now, and he calls the cell and module space “hypercommoditized.” Those are hardly ringing endorsements even if he sees Power-One’s clean balance sheet as an overarching strength.

As I pointed out recently regarding SolarCity Corp (NASDAQ:SCTY), the hope is that residential installations through leasing programs will drive business forward. GTM Research forecasts residential solar financing will grow nearly fivefold by 2016, pushed higher in part by the growth of bonds backed by cash flows generated from leasing the panels. While Solar City is the biggest name in the game, SunPower also ranks among the largest third-party ownership vendors.

The solar shops may be having their day in the sun, but the economics of the business still don’t favor them and I can’t see the gains holding.

The article Whoa! These 3 Stocks Are Shining Bright originally appeared on Fool.com and is written by Rich Duprey.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com, Power-One, and Staples.

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