Shares of solar panel manufacturers like Suntech Power (NYSE:STP) and First Solar (NASDAQ:FSLR) fell, a day after posting strong gains as Jefferies & Co. analyst Jesse Pichel questioned the view that demand for panels would be stronger than previously anticipated.  According to Mr. Pichel, European markets such as Germany, Italy and Greece continued to show signs of weakness and that higher demand for solar equipment was unlikely under the present macroeconomic picture in Southern Europe. Solar companies have faced major problems over the last year as major European markets have seen large cutbacks in support for the industry.
We have a $2.70 price estimate for Suntech Power, which is at a 55% premium to its current market price.
Shares of solar stocks showed gains on Tuesday after First Solar announced that it would extend production in its German plant as demand was higher than its previous estimates. The news was interpreted as a sign that sales in European markets would remain robust through the year despite subsidy cuts in Germany. However, according to Mr. Pichel, his interviews with industry sources suggest that financing issues and macroeconomic uncertainty in the region were driving down sales. Sales in major markets such as Germany and Italy were below expectations and according to Pichel, unlikely to post robust growth. 
The latest report from Jesse Pichel, ties in with the broader picture of the solar industry. Demand for solar equipment is moving from Europe to the U.S. and to emerging markets such as China and India. Panel sales in the U.S. posted sharp growth in Q1 this year. Sales in these new markets are being spurred by falling equipment costs and government programs to spur the clean energy industry. Suntech and other manufacturers are scrambling to gain a foothold in these new markets. In particular, Suntech is looking to capture sales in the China, which is expected to add between 3 to 5 GW of solar capacity in the current year.
- German Government Looks to Pass Solar Cuts by Next Month (trefis.com)
- Suntech Strikes European Sales Agreement For 120 MW Of Panels (trefis.com)