Sector Watch: Solar energy stocks

With both political parties promising further development of alternative energy sources, the future looks bright for solar energy companies Canadian Solar, Inc. (Nasdaq:CSIQ) and Solarfun Power Holdings Co. (Nasdaq:SOLF). 

Canadian Solar is a leading global supplier of solar modules. The company, which incorporated in Canada but manufactures in China, serves a global customer base of tier one suppliers, solar farm project developers/installers and OEMs.

Canadian Solar is growing through capacity additions, vertical integration and new products. A new manufacturing facility opened in February increases solar module production to 400 MW. A further increase to 620 MW is planned by year-end 2008. The company began deliveries of its high-tech e-Modules in May and has secured a 9 MW e-Module sales contract. With two differentiated product lines (regular and e-Modules), Canadian Solar is able to sell at different price points. The company maintains a strong foothold in Germany and Spain and has diversified its markets to include Italy, the Czech Republic, North America and Asia. 

Silicon supplies and prices are a major issue for solar module manufacturers. Canadian Solar has addressed this issue through supply agreements covering 70% of its 2009 silicon requirements. A new supply agreement signed with GCL Silicon Technology in July further strengthens company feedstocks.

Canadian Solar recorded its fifth-consecutive quarter of sequential growth in the 2008 second quarter. Quarterly revenues rose 250% year over year to $212.6 million from $60.4 million in the 2007 second quarter, and earnings jumped to $10.5 million, or $0.36 per share, from a net loss of $2.9 million, or $0.11 per share, last year. The company also increased 2008 revenue guidance to $850 million to $979 million from $750 million to $870 million. Analysts predict this company will produce 31% . . .

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