Outlook for Suntech’s PV Module Sales
Suntech Power’s (NYSE:STP) sales of photovoltaic (PV) modules have increased steadily over the years as a result of various benefits and subsidies provided by governments on adopting solar energy. This combined with lower input costs led to a reduction in prices thereby increasing demand. Suntech mainly competes with Sunpower (NASDAQ:SPWRA) and First Solar (NASDAQ:FSLR) in the solar energy industry.
We believe that government subsidies and general market demand will push growth of solar energy technologies, thereby benefiting players like Suntech Power. While we expect Suntech’s PV module sales will increase to 4.35 billion megawatts (MW), Trefis members predict PV modules sales will cross 5 billion MW by the end of our forecast period. The member forecast implies 8% upside to our price estimate for STP.
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We maintain a $10.68 price estimate for Suntech Power’s stock.
Government Subsidies Will Benefit Solar Companies
One reason why solar power has struggled to accelerate adoption is because of the initial cost involved. As the price for traditional forms of energy like coal and oil rises and concerns for global warming increase, government subsidies will drive significant growth in the renewable energy industry. Generous rebates could further cut the price of solar panels for consumers.
Improvement in Solar Energy Efficiency
Solar power is currently far less efficient than other energy sources, even wind. Suntech Power’s R&D focus is on increasing this efficiency while minimizing the use of inputs like polysilicon. If SunPower can develop technology that allows more electricity to be produced with less area of land taken up by solar modules (and for less money), solar power will become more competitive. Concurrently, as solar power’s efficiency rises, it becomes more competitive with oil and gas. Suntech Power, then, stands to benefit both from rising oil and gas prices as well as from its industry leading product efficiency.
See our full analysis and $10.68 price estimate for Suntech Power
Trefis Community Forecast
Trefis members forecast Suntech’s PV modules sales will increase from 1.21 billion in 2010 to 5.2 billion by the end of our forecast period, compared to the baseline Trefis estimate of an increase from to around 4.4 billion during the same period. The member estimates imply an upside of 8% to our $10.68 price estimate for Suntech Power’s stock.