Knobias Clip Report (11-10-2007)

Submitted By Knobias ClipReport

Solar Names Shed Gain on Possible Energy Bill Revision

Monday’s session saw the market’s losses decelerate with many blue chips finding their footing for most of the day while tech names saw a sell off led by E-Trade Financial which saw its shares fall by 60%. An end of day sell off saw the Dow close below 13,000 for the first time in nearly 3 months, but with the holiday season approaching, and an already weary consumer knocked on his heels, the buying season might not be as giving to many investors.

In the small cap space, many of the solar names saw their shares take a huge hit following the industry’s trade group posting of an alert on its web site noting that Congress may not pass renewable initiatives in the much anticipated energy bill.

There was no confirmation that Congress would pass the bill without the tax credits but the Solar Energy Industries Association lobbied supporters to call their representatives and display their reactions to the cut in solar initiatives.

Some media outlets reported that Senate Majority Leader Harry Reid and House Majority Leader Nancy Pelosi had decided to remove the renewable portfolio standard (RPS) and all tax provisions benefiting renewables so that they could pass an energy bill through Congress before Thanksgiving break, but a spokesman for Pelosi noted a decision hadn’t been made on any provision yet.

Even mentioning the dropping in the provisions had many clamoring for a change.

Noted Rhone Resch, President of the Solar Energy Association, “We truly hope that Congress will provide the leadership that brings our country into the 21st century on energy technologies and energy policy-not remain stuck in the 19th and 20th century.”

Following the reports, shares of the solar names saw huge losses. SunPower Corp. (SPWR) fell 14.6%, Ascent Solar Technologies Inc.'s (ASTI) stock fell 12%, First Solar Inc.'s (FSLR) shares fell 14%, Evergreen Solar Inc (ESLR) dropped 13.7%, and even wafer producer MEMC Electronic Materials, Inc (WFR) shed 4.7%.

The pullbacks could be an attractive entry point for long term investors wanting a piece of the solar pie. Oil continues to hover in the $100 range. With crude that high, all alternatives will continue to be in higher demand globally. Also, the US market only accounts for some 10% of the global solar market.

Analysts confirmed the thought. Think Equity Partners noted the removal of the domestic tax credit would not be the end of the world. Stanford analysts acknowledged that the solar tax credits will be set aside for now, but expects there will be an extension as they don't expire until the end of 2008. SG Cowen analysts viewed the move as a “psychological blow” but noted it would have little near term impact on demand and recommended building positions. American Technology Research noted that the recent correction presented a buying opportunity.

In any event, the sector got beat up pretty badly on the speculation the Democrats would concede some points in their energy bill. Even if it isn’t passed in this session, it isn’t the end of domestic tax initiatives for alternate energy. At a later date, a new bill or initiative could be put in place to do what needs to be done which is to curb America’s dependency on foreign energy and with that in mind, investors would be wise to watch.



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