Monday, April 18, 2011

GT Solar (SOLR) Valuation Deservedly Low

A lot is being made of the solar sector recently, including GT Solar (Nasdaq:SOLR), which is trading deservedly under $10 a share.

There is little, if anything, positive coming out of the solar sector, as it's a government-backed market, not one that has emerged from legitimate demand.

That means when countries are strapped for cash, like in Europe, and when they're battling inflation, with the likelihood of cutting back on solar spending, as in China, there's little that is left on the table to give the sector a boost, as they're almost entirely dependent on taxpayer subsidies around the world because of the extreme high costs associated with the solar industry as an energy source.

This of course means a volatile and unpredictable company, and that's the case will the vast majority of solar companies, including GT Solar.

It's unclear if the share price of GT Solar has lower government spending built into the share price, but it will definitely hang over it as it will with many others in the solar sector.

GT has an estimated $1.41 in net income expected by analysts for the current fiscal year.

In the end GT Solar and other companies don't have low valuations because they're being wrongly perceived or ignored, but because they are exactly what they deserve.

Solar is a media darling with little demand other than from governments trying to force the expensive energy source on its people. Once subsidies are removed, the solar energy will be found naked. Of course the entire industry centers around subsidies and what governments will do in the future.

GT Solar was trading at $9.27, falling $0.42, or 4.33 percent, as of 1:28 PM EDT.

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