Solar stocks -- recently bruised and battered -- were up slightly Tuesday due to what analysts say might be a natural market correction.
The sector had been in free fall since Friday after speculation that an informal congressional committee was considering cutting a key tax credit for renewable energies out of the energy bill. WilderHill Clean Energy Index, for example, fell 14.5 percent to 235 points from Thursday to Monday. During that same period, Evergreen Solar fell 24 percent to $12.15, SunPower fell 22.6 percent to $109.88, and Suntech Power fell 13.5 percent to $56.36.
But Tuesday saw a small turnaround.
Overall, the solar sector was up 7 percent Tuesday afternoon, according to Travis Bradford, president of the Prometheus Institute, a partner of Greentech Media Research. The WilderHill index was up 3.65 percent Tuesday afternoon to 243.92. Evergreen, Sunpower and Suntech all saw their stocks move up.
First Solar also saw its shares up around 9 percent to $194 Tuesday after two positive analyst reports. Broadpoint initiated its coverage Tuesday morning with a "buy" rating and a target of $225, while American Technology on Monday afternoon upgraded First Solar from a "neutral" to a "buy" rating. First Solar had fallen from $224.43 Thursday to $177.70 Monday.
"Investors are recognizing that the last two days were a little bit of an overreaction," said American Technology analyst John Hardy. "Nothing has really changed in the long-term story. All the fundamentals remain the same, but what you're seeing is more about the psychology of investors."
For some solar companies, the stock increases followed positive company announcements.
Trina Solar, for example, was trading up around 7 percent to $50.36 Tuesday afternoon after the Chinese solar module maker said it had signed a deal with Sichuan Yongxiang Polysilicon to provide Trina with 70 percent of the silicon that Trina would need to manufacture solar panels in 2008.
In a silicon shortage that has the solar industry nervous as it heads into the new year, the news that Trina will be able to produce around 1.3 gigawatts of solar power with the newly acquired silicon has apparently helped comfort investors.
But the rosy feelings were hardly universal.
LDK Solar (NYSE: LDK) shares fell 11.2 percent to $30.96 per share in afternoon trading.
The company, which has been under fire for allegations of discrepancies in its silicon inventory, didn't announce any news Tuesday that would account for the drop.
Investors are hoping LDK will release more information about its silicon inventory -- and in particular about an independent audit of its inventory -- at that time. A company spokesperson said LDK plans to release earnings as soon as possible after the audit is completed.
According to the U.S. Securities and Exchange Commission Web site, companies are required to file quarterly earnings 45 days after the close of the quarter.
In LDK's case, that deadline would have been Tuesday, but the company spokesperson said LDK must file earnings with the SEC only once per year because of its foreign ownership.
Akeena Solar stock also took a hit Tuesday. It's shares fell 13.8 percent to $6.26 per share in afternoon trading after the company announced a third-quarter net loss of $3.7 million, or 16 cents per share, compared with a net loss of $400,000, or 4 cents per share, in the third quarter of last year.
The increased loss came despite net sales that grew to $8.1 million, compared with $3.6 million in the year-ago quarter.
The company blamed the loss on a lower average selling price, as well as delays in the completion of some projects and a shift toward more commercial projects, which take longer to sell and install.
And Solon AG, a German solar module maker, saw stocks fall 12.93 percent Tuesday to €77.72 ($113.41), despite a third-quarter earnings report that showed strong growth in Spain and Germany, as well as an 83-percent profit increase that led the company to lift its full-year revenue and profit expectations.
Bradford said the drop in the overall solar sector Monday could have signaled investors to reconsider the valuations of individual stocks.
"I think what yesterday did is, because there was such a dramatic drop in almost every stock, [the market] is changing from a momentum mindset to a fundamental mindset," he said. "Investors start thinking: If the momentum phase is over, which individual company's funds justify the valuation?"
He said investors might be less tolerant of risk, too.
"Risk tolerance has changed," he said, "and LDK's the riskiest one right now because it has specific risks, while [others] have more diffuse risks."