Friday, April 1, 2011

Yingli Green Energy's (YGE) Long-Term Future

Yingli Green Energy (NYSE:YGE), as with most companies in the solar sector, has been experiencing a wild ride over the last year, and is now trading lower than it did a year ago, with wild fluctuations.

The one thing Yingli has going for it, assuming it will continue to be the result in the future, is the 70 percent in panel contracts it won in the Chinese domestic market.

But there are several factors are in play surrounding the solar sector, with most being negative.

The only element that offers some strength to the industry is what, if any, response will there be from countries as a result of the media coverage of the nuclear industry because of the earthquake in Japan.

In reality it doesn't look like over the long term it will have an impact, as the need for energy hasn't changed, and the silly idea solar or wind can in any way make a significant impact at this time can't be taken seriously.

Other than that, most of the news in the solar industry is largely negative.

The ongoing high price of energy produced by solar continues to be the most negative, and while there are obvious calls for companies to lower their prices, that's much easier said than done, and it'll get harder as cash-strapped and debt-laden nations cut back on their subsidies, without which there would be no solar industry; speaking to the extreme weakness and vulnerability it faces as the market isn't generating demand, but governments are, making solar a very risky proposition going forward.

A Reuters report, citing unnamed sources, said China is going to double its installation goal over the next five years for solar, a dubious assertion at best, and unproven as to its veracity.

China has already publicly stated it's going to continue on with its nuclear strategy, even with the relatively irrelevant situation in Japan.

It's not irrelevant because of those that may be harmed from valiantly fighting to reduce the damage from radioactive release, but because it has been far over a century since Japan had experienced a earthquake of that magnitude, making it a situation that could never be planned for or necessarily expected to happen more than once in a couple of generations.

So to make decisions and plans based on those times of anomalies isn't something leaders will do, because it isn't realistic, as actions will prove out.

Solar isn't going to gain because of the earthquake in Japan, contrary to the rhetoric governments and politicians are employing at this time.

Think of how people would respond if they aren't allowed to have needed energy. That guarantees nuclear will be a key part of the energy future. Period!

All the hoopla about renewable energy and other dishonest assertions will quietly go away once the situation in Japan fades out of memory, and the reality of energy needs today kick in.

Solar will continue to be a risky and unpredictable sector for years, always getting some positive sentiment when negative news appears to strengthen it, only to fall back again when the emotional response falls by the wayside.

Consequently, Yingli Green Energy, along with its peers, will continue to be in for a rough ride as they are dependent on factors like demand, which is completely out of there control, and not on market forces. Government subsidies and decisions are the rule in solar; a fickle scenario at best.

Yingli Green Energy closed Thursday at $12.90, gaining $0.09, or 0.70 percent.


BC56879 said...

well, for long term, solar is bullish for sure

Marty said...

Who writes these reports? Who uses the wrong form of the word "their" in an article that is supposed to be professional? Where can you get real unbiased analysis on a stock?

Anonymous said...

How many nuclear disasters will it take for the world to see, it's not safe power? Most solar pays for itself in 10 years and will last more than 25 years. Maybe this author likes radiation in his food and water. What about all those spent fuel rods in giant stainless tupperware? Ask yourself this. Would I live next to a nuclear facility?