Gordon Johnson And Solar Stocks: A Chronology Of Bearishness

It may be time for solar stocks to emerge out of the doldrums and bask under the glorious sunshine. Gordon Johnson of Axiom Capital, who was decisively bearish on solar stocks, is revisiting his call and upgraded a few prominent names in the sector.

Bear Way Back From 2008

Back in October 2008, the analyst made his first call on the sector, which was markedly bearish. Johnson rated the sector an Underperform and Suntech Power Holdings Co., Ltd. (ADR) (Previously traded STPFQ), another stock he covered in the sector, saw its stocks sink deep into the abyss, falling to $5 from $24, as Sweden, an end market scaled back on spending. This created a supply glut.

In an interview with Barron's in September 2009, Johnson called out SunPower Corporation SPWR at a Sell, with a $15 price target. For both Yingli Green Energy Holding Co Ltd (ADR)YGE and Trina Solar Limited (ADR) TSL, he had Hold ratings, with a price target of $24 for Trina and $9 for Yingli.

Related Link: How Will The Presidential Election Affect Solar Stocks

In about a year, SunPower slumped to around $12, Yingli was steady around $10 and Trina around $30.

A Questionable Call In 2012

After a horrid 2011, which saw the shares of the solar companies losing $27 billion in market capitalization, Johnson saw salvation for the sector in 2012. In an en masse upgrade, he raised his ratings on First Solar, Inc. FSLR, Yingli, Trina, Suntech Power and Power One Inc (Previously traded PWER). The rationale behind the move: The inventory glut is clearing up, thanks to increasing solar installations in Germany and the U.K.

Over a one-year horizon, the paradise lost remained lost for these companies.

Bearish In 2013 But Stocks Strong

In mid-2013, when solar stocks rallied strongly, Johnson recommended shorting the sector, as he firmly believed, solar energy plants will never attain grid parity, a point where an alternative energy costs same or less than traditional sources. The analyst saw downside to the stocks in the sector. First Solar, Trina and JA Solar Holdings Co., Ltd. (ADR) JASO were on his shorting list. However, since mid-2013, the stocks only went from strength to strength.

Johnson was again negative on the sector in 2014, citing balance sheet risks for the companies, as they were up against Chinese cell/module vendors. The stocks had a rough ride for much of 2014 and 2015.

An About Face For The Chronic Bear

Johnson now sees light at the end of the tunnel. Axiom Capital upgraded Yingli, Trina and JA Solar all to Buy from Sell and SolarCity Corp SCTY to Hold. The price target on Yingli shares was raised to $5.40, Trina to $15 and JA Solar to $10.

The analyst based his new found optimism on the proposed FiT cut by China in July 2017, his view that multi-wafer, multi-cell price declines may be bottoming out, the underperformance of the Solar TAN Index attracting clean energy funds' focus on solar stocks and a possible Hillary Clinton's re-election that could lead to more investment into the sector.

Related Link: Solar's Most Noted Bear Turns Bullish, Upgrades SolarCity, Trina, JA And Yingli

At Last Check ...

• First Solar was down 0.55 percent at $39.53.
• JA Solar was up 5.24 percent at $6.93.
• Power One is no longer publicly traded.
• SolarCity Corp was down 2.64 percent at $19.52.
• SunPower was flat on the day at $8.84.
• Suntech is no longer publicly traded.
• Trina was up 1.12 percent at $10.38.
• Yingli was up 2.57 percent at $3.99.

Full ratings data available on Benzinga Pro.