Deutsche Bank on Thursday issued its 2015 Outlook on the Solar Industry along with its Top Picks.
Analyst Vishal Shah believed the “recent volatility in solar stocks, driven largely by oil price weakness, presents an attractive entry point for investors as we expect 2015 to be a year of stable industry pricing and accelerating volume growth.”
Shah expected a “balanced supply demand outlook as strong demand from the US and improving demand from China/other emerging solar markets offsets any potential demand weakness in the UK/Japan. While weak oil prices could remain an overhang, our work suggests very little impact on solar demand fundamentals and expect several company specific positive catalysts in terms of execution of new/existing yieldcos.”
The analyst report noted that “oil prices do not have a material impact on solar demand” because “oil represents only about 5 percent of global electricity production” and in the US and China, oil-based electricity generation is less than 1 percent of the total. Furthermore, “the fuel cost of oil-based electricity generation...is higher than solar in many regions worldwide.”
The report noted three other important themes for 2015:
1. “Strong, diverse demand drivers; US rooftop market will be the key highlight and utilities will also start competing in the solar market. Project pipelines and margins will continue to expand. Expect cost reduction to also drive module margins higher.”
2. “Yieldcos will continue to remain popular source of project capital funding, but companies with first mover advantage will be in a better position to build pipelines/acquire development assets.”
3. “Policy environment will continue to improve. Given that anti-dumping duties for Chinese modules are expected to be completely removed, we expect companies to see margin expansion.”
The firm’s Buy-rated Top Picks were SunEdison Inc (NYSE: SUNE), Vivint Solar Inc (NYSE: VSLR), SunPower Corporation (NASDAQ: SPWR) and SolarCity Corp (NASDAQ: SCTY).
The firm downgraded Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE: YGE) from Buy to Hold and cut its price target from $5 to $3 over balance sheet concerns and financial flexibility.
Latest Ratings for SUNE
| Nov 2014 | Brean Capital | Upgrades | Hold | Buy |
| Oct 2014 | Cowen & Company | Upgrades | Market Perform | Outperform |
| Oct 2014 | Morgan Stanley | Maintains | Overweight |
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