Solar ETFs Ablaze After MEMC Q4 Beat, Obama Speech


Solar energy ETFs heated to new highs Wednesday afterMEMC Electronic Materials ( WFR ) eclipsed fourth-quarter estimates and President Obama in his State of the Union speech the night before called for more green energy.

Guggenheim Solar ( TAN ) surged 1.45% andMarket Vectors Solar Energy ( KWT ) 2.67%, each climbing to nine-month intraday highs.

As the No. 1-performing industry group this year, they've vaulted 22% year to date and an eye-popping 44% the past three months. By contrast, SPDR S&P 500 ( SPY ) added 7% and 11% in the same periods.

MEMC, a top holding in both ETFs, popped 7% to 4.82 Wednesday, near a one-year high in heavy volume. The silicon wafer maker reported Q4 earnings of 8 cents a share while analysts expected zero profit. It lost 29 cents a share in the year-ago period when it took a $1.12 billion hit for restructuring.

Revenue totaled $704.3 million, topping forecasts of $663.1 million. The company said revenue for its semiconductor materials unit was flat as higher sales volume offset lower prices. Its solar energy unit's sales in terms of megawatts were down year over year.

After years of price declines due to excess output in China, panel prices and polysilicon -- the key raw material in solar panels -- have bottomed, Credit Suisse wrote in a weekly report released Monday.

Its analysts believe demand is gradually recovering in various markets, policies in China could boost demand and there's a possibility that solar firms could restructure as master limited partnerships or real estate investment trusts.

But excess supply in China needs to be burned off and several companies need to have their debts restructured or written off, Credit Suisse wrote.

China's initiatives would pump another $1.1 billion in subsidies into the sector and offer solar firms cheap long-term loans to reignite the export-heavy sector, Zacks Equity Research wrote in a report Tuesday. What's more, projects valued at $6.8 billion are under development in the United Arab Emirates, Kuwait, Oman, Egypt, Jordan and Morocco, Zacks wrote.

The number of Chinese solar manufacturers tumbled 42% in 2012 and the industry will likely shrink this year as more firms go out of business, get bought out or merge with others, according to S&P Capital IQ.

"This count will continue to fall in 2013, especially if Europe decides to inject similar tariffs that the U.S. did on China-made solar goods," S&P analyst Angelo Zino wrote in a report Jan. 29.

Fewer players would reduce output and thereby boost prices. "Since the start of the year, prices are up 3.9% for polysilicon, 1.1% for wafers, 1.5% for cells and 0.5% for c-Si modules," Zino wrote. "The rise in polysilicon prices should be a precursor that supply is beginning to tighten across the chain."

He sees the industry survivors returning to profitability by 2014.

Obama On Climate

In his State of the Union speech Tuesday night, the president called on Congress to "pursue a bipartisan, market-based solution to climate change."

If it doesn't, President Obama said he would have his Cabinet come up with executive actions to speed up the country's switch to renewable energy. He also called for using some oil and gas revenues to pay for research and technologies to get cars off of oil entirely.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs

Referenced Stocks: KWT , SPY , TAN , WFR

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