Thursday saw a lift for some Chinesesolarstocks as LDK reassured investors an earnings statement is on the way and Suntech Power beat analyst expectations in third quarter earnings.
Meanwhile a report published Wednesday called China's solar power potential "enormous".
After dropping steadily for a week, LDK Solar's stocks ended Thursday up 17.78 percent at $34.45 after the Chinese solar wafer maker reassured investors that an audit report and third-quarter earnings statement were on the way.
"Business remains strong and LDK has continued its wafer production, shipments to customers and capacity expansion as planned," the company said in a statement.
LDK's (NYSE: LDK) stocks are still trading at less than half of what they were worth a month a half ago, before the company's former financial controller, Charley Situ, charged LDK with incorrectly reporting its inventories of solar-grade silicon. That charge led LDK to initiate an independent audit, and also caused the U.S. Securities and Exchange Commission to contact the company about the allegations.
Analysts - largely reluctant to comment on LDK given the controversy surrounding the company - called Thursday's boost another indication of the volatility and uncertainty surrounding LDK.
"Sharp fluctuations in an equity over a short period means there's difficulty attaching a proper value to that stock, and if you've got a lot of unknowns that makes investors overreach or overshoot, trying to ascertain what this stock is really worth," said Robert Wilder of WilderShares.
LDK had taken a hit last week - along with most of the solar sector - amid speculation that a congressional committee was considering cutting a key tax credit for renewable energies out of the U.S. energy bill.
And LDK had further troubled investors by giving no indication as to when it would release its latest earnings. A company spokesperson told Greentech Media earlier this week that, as a foreign company, LDK was not required to release quarterly earnings to the SEC.
While still offering no specific timeframe for the audits and earnings, LDK said Thursday the Audit Committee expects to report findings in early December, and said the company plans to report its third quarter earnings after that.
LDK also said Thursday it estimates its fourth-quarter earnings will be 37 cents per share to 41 cents per share on revenue of $165 to $170 million, and wafer shipments will be between 82 and 88 megawatts. That exceeded the company's adjusted third-quarter revenue estimates of $140 to $150 million.
Suntech Beats Expectations
Meanwhile, Chinese solar titan Suntech Power Holdings stock jumped almost 6 percent Thursday after reporting third-quarter earnings that beat analyst expectations.
Net income for the solar-panel maker shot up 84 percent from a year ago to $53.3 million, or 32 cents per share for the quarter.
Analysts had expected a profit of 28 cents per share.
The company announced additional good news, including more than doubling its net revenue to $386.7 million from $163 million reported in the same quarter last year.
Suntech also let investors know what to expect in the future. The company boasted that it has secured enough silicon to produce more than 530 megawatts in 2008 and expects revenues to be in the range of $1.9 billion to $2.1 billion for the year.
Investors applauded the news by driving Suntech's stock up $3.41 during midday trading to $65.10. But Wall Street calmed a bit, leaving company shares to close at $64.37.
Jeff Osborne, an analyst with Thomas Weisel Partners, liked Suntech's top-line growth. But he's no pushover. He found the company's margins disappointing.
The Chinese company posted a quarterly gross margin of 24 percent. Meanwhile German competitor Q-Cells (Frankfurt Stock Exchange: QCE) posted a quarterly gross margin of 37 percent.
That's because the solar industry has been in the midst of a silicon shortage that has put the squeeze on company margins, especially new entrants (see Could China Steal the Solar Throne?, Silicon Steals the Spotlight, Again, Silicon Shortage Has Big Impact, Silicon Starvation, Panelists Debate When the Silicon Shortage Will End).
But there is a light guiding Suntech through the shortage turmoil, which in part explains why Wall Street elevated Suntech's stock.
"Polysilicon costs are going down for them and average selling price is up and that's what's exciting for investors," Osborne said.
A slew of contracts are helping Suntech get good deals on silicon, including one contract with Asia Silicon to buy up to $1.5 billion worth of the much coveted material (see Suntech Signs $1.5B Deal for Silicon).
China's Solar to Grow
The good news for Chinese solar companies was compounded by a report released Wednesday from the WorldWatch Institute indicating that Chinese demand for solar is likely to grow significantly.
The organization expects China to achieve - and possibly even exceed - its goal of obtaining 15 percent of its energy from renewable sources by 2020. It says renewable energy could provide 30 percent of the nation's energy by 2050.
The report states that 4,000 tons of new silicon production capacity is expected to emerge by 2008, which could help to ease China's silicon shortage, and that large-scale grid solar photovoltaic installations may follow in five to seven years in China as the price of solar power falls.