Solar Headwinds, Part II: Competitive Forces Constraining Industry Profitability

Sun, 03/14/2010 - 04:32 EDT  in
 

tom konrad Tom Konrad (AltEnergyStocks) submits: In the first part of this series, I showed how a competitive analysis of the corn ethanol industry in early 2007 illuminated the forces that soon caused ethanol company stock prices to collapse in late 2007. I also implied that the solar cell manufacturers, including industry leaders such as Sunpower (SPWRA) and First Solar (FSLR) are vulnerable to these forces and may not be able to maintain high returns on capital over the long term. I'm not predicting that solar stocks will collapse later this year, as happened with ethanol stocks in 2007. The dramatic timing of my article on ethanol companies with the quick collapse of ethanol stocks was coincidental. Competitive analysis of an industry can illuminate long term trends, but short term stock prices often have very little to do with long term trends or underlying economics. Given that solar stocks have fallen considerably over the last two years (see chart), a further drastic decline seems unlikely.Complete Story »

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