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The shares of China based Shunfeng Photovoltaic International performed best over the year 2013 with a 541% increase. Shunfeng is best known for their acquisition of Suntech’s main assets. Just close behind the number one, we find two American giants: SunPower & Solarcity . 2013 proved to be an excellent year for investors in the solar industry, if you had put $100,- on the companies in this top 10, you would have made $336,- at the end of 2013. To compare: $100,- divided over all 40 solar companies made $122,-, while your money divided over all S&P 500 companies just made $30,-.
This upward trend is reflected in our research, as 36 out of the 40 companies included in our full list showed a positive share development. Particularly interesting is the composition of this Top 10 with 6 China based and 4 US based companies, while the 4 German and 9 Taiwanese companies in our list have not been able to sufficiently impress investors during 2013. Furthermore this Top 10 is dominated by commodity-based companies, with the exception of lease company Solarcity .
We hit rock-bottom in 2012
The share development in 2013 took a 180 degrees turn compared to Solarplaza’s 2011 list: http://www.solarplaza.com/top10-best-performing-stocks2/ . Where in 2011 the industry had to cope with oversupply, margin pressure and reduced government incentives, it now proved itself capable to be more cost efficient during market growth and has remarkably recovered in 2013. This caused the share price development to take a parabolic shape over the past 3 years which hit its rock-bottom in 2012.
Naturally, there are a number of companies for which these turbulent years have lasted just too long. Big companies such as Conergy , LDK and recently Suntech faced insolvency problems and the renowned Solarworld ’s stock dropped 55% over 2013, as it experienced a year full of restructuring. Other companies, such as Q-cells , DelSolar and Power-one , effectively merged or sold their business.
Why are stocks up in 2013?
This movement cannot be merely explained by the fact these stocks were overly depressed in 2012. It is without doubt that this in combination with increased public attention has attracted investors, however there must have been more fundamental influences that explain the recovery of the solar industry shares.
Europe has long been the leading continent in the solar industry, but this year the US, China and Japan emerged as solar giants, with Asia taking the lead over Europe. The US solar market has embraced the path towards a mainstream status and saw customer and investment adoption rapidly grow. Cost competitiveness and the booming lease market play a prominent role in this. Solar has replaced wind-energy as the second-largest new source of generating electricity behind natural gas. The two manufacturers First Solar and SunPower and the two service providers Solarcity and SunEdison profited incredibly from these developments. In January 2013 China announced the plan to build 10 GW of solar, which paves the path to increase the previously announced goal of 21 GW of capacity by 2015 to 35 GW. This has caused a large increase in demand for modules of the local solar manufacturers such as Trina Solar and Yingli Green Energy . Despite these developments in China and the US we spot 2 of the world’s largest manufacturers Yingli and First Solar in our full list only at number 16 and 19 respectively. In Japan demand has increased significantly through the full year 2013, as the government agreed to a $0.53 per kWh feed-in tariff on systems less than 10kWh.
Next to these positive national developments, firms in the solar industry become more cost effective and show increased margins. When Canadian Solar announced a net profit in Q3, it was the first company in the industry which returned to the positive numbers after 2 years of losses. Furthermore, First Solar increased its exposure wisely in Japan and saw a rise in its revenues. To show you this development was not always anticipated, please remind that First Solar was named “the stock to avoid in 2013” by JP Morgan. Although we only find the company back on a 19th place, their shares rose in value with 77%.
Outlook for 2014
What does this mean for 2014, is it a sign that the weaker companies are out of business and a new landscape of companies is leading the next solar revolution? On the other hand, many voices claim we have received most of the positive news already in 2013, which has led to speculative investments, making us head towards the next bubble. Naturally there are speculative investors in the market and there are risks such as falling natural gas prices, withdrawal of subsidies and oversupply, but fortunately there are enough positive signs for the global market in 2014.
The rising demand for shares in the pre-2011 era was partly triggered by the decreasing costs of solar panels themselves, which reflects a relation between the cost side of the solar industry and the stock market. During the current market gains, the focus is on lowering costs for the whole balance of system, such as wiring and customer acquisition, thanks to the learning curves of the relative new service provider giants.
Next to the cost side of the systems, the rise in demand from the US, China and Japan continues in the years to come. Where 29.9 GW of PV systems were installed globally in 2012, this has increased to 37 GW in 2013. According to the ‘Global Market Outlook for PV 2013-2017’ by EPIA the annual PV market reaches a minimum of 48 GW by 2017. Comparing the outlook with the 2013 actuals, the market is already 10 GW beyond the anticipated minimum for 2013. Less dependency on incentives, subsidy independent operating companies, decreased financial constraints and more and more market growth contribute to strong financial results in the coming years.
The upward trend in share price development has continued in the first quarter of 2014, as SunEdison and GT Advanced Technologies stocks increased with 50% and 100% respectively. Solarcity picked up the same path in January and February, but saw their shares dwindle after their Q4 result publication not fully met up with the expectations. Therefore, it remains unsure if a correction for last year’s surging stocks must be anticipated, but overall the share price development looks positive in the long term.
Full Top40 overview
We didn't stop at 10 and have actually made an extended Top40, which is freely available upon leaving your contact details.
This overview was compiled using public sources, freely available to all.
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