With so much green talk in the air, if you’re an investor interested in getting into alternative energy, you can take your pick buying anything from ethanol to wind to solar, or you can focus on less than pure plays such as the waste industry, or you can come up with your own combinations of such investments. Whether you choose to go with large caps, mid-size, small or micro-caps–often those newest and most innovative of companies and stocks, you need to know the lay of the land a bit.
Most of the payoff in terms of actual profits, industry observers feel, will be down the road for these companies. Re-cycling waste, hybrid cars, and so on are technologies that, while available, are not yet fully locked into the mainstream or economic pipeline in the same way as, say, electric utilities. This is why many investors trade the micro-caps in this sector, as technological advancements with future earnings implications—sometimes far in the future—are more the norm than the exception. But with growth rates, despite some bumpy travel, predicted at up to 40% in the next few years, you can see the appeal of these stocks. For the more long-term or value investor, or someone who wants some tangible earnings to look at now, there are growing companies involved in the alternative energy industry producing that right now: solar power stocks.
The solar stocks, which due to their technology are often classified along with semi-conductor stocks, but which more properly belong to the energy sector, are a group which is both producing energy and revenues right now. Two such stocks, First Solar, Inc. (NASDAQ: FSLR) and Canadian Solar (NASDAQ: CSIQ), are good examples. This year, despite some downturn in the commitment to increase government incentives for adding solar (mainly in Canada), these stocks continued to make some headway. As in mainstream energy, other factors play into the rise and fall of the immediate business fortunes of these companies. This year, there was an increase in demand for ethanol, while solar was down. The alternative energy sector is still small enough so that increases in business in one segment sometimes show a related reduced spending on another alternative segment.
First Solar, a Phoenix, Arizona company which both designs and manufactures proprietary solar modules, has a market cap of $13.5B, and is due to report earnings on Wednesday, February 13 (tomorrow) before the bell. The company is expected to announce 53 cents a share earnings for the fourth quarter and $1.16 for the full year 2007. Analysts’ projections have earnings for 2008 slated at $1.98 per share. The stock was recently at 189, and has traded from 32.60-283.00 in the last year.
Canadian Solar, by contrast, has a market cap of $500M, with $68M revenue in 2006, is expected to show a loss of 5 cents a share for the full year 2007, but projects $1.16 EPS for 2008. The stock has traded in the $20-a-share range recently, with its twelve month range 6.50-31.44.
So once investors or traders acclimate themselves to the specifics of the alternative energy field—which is becoming more and more mainstream by the day—they can make more informed and what they hope are profitable decisions.
Let us hear your thoughts below: