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U.S. Solar Market Growing

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    Raymond James SVP energy equity research Pavel Molchanov on bright spots in the solar market.

  • Duration 3:45
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We'll Citigroup just started coverage of the solar sacked over what -- are -- for companies getting buyer ratings but.

And cents for solar may be disappearing joining me now -- not.

His -- senior vice president for energy.

Equity research and an actress does -- -- don't pilot another bank but Citigroup even -- one of these companies.

Some power on -- -- -- conviction list.

But yet many states are saying they don't want to pay for the subsidies.

Anymore.

Which wearing a leading -- -- -- I'm I'm leaning bearish.

And let me explain why so first of all.

The United States is not the key market for solar in the world.

And a company like -- -- very global high of the U last represented less than 15.

Of the global solar market Europe's much more important in aggregate China is becoming more important so the US is a growing market to be sure.

I even -- as you as you -- some states have been.

Pulling back -- -- -- -- banking totaled you know Europe is still much more important any Europe but it is really where demand has been falling -- -- And sell for a company like sun power yes they they have had some that pretty good traction.

In the -- latter particularly with large projects.

But they have been losing huge amounts of money -- this past quarter they just reported last week right -- gross margin was 7%.

That's at 7%.

And that are guiding to something.

In -- maybe even lower this current quarter sell I I would tell you that to me is an absolute short.

-- -- -- I assume you're saying here to take a look at -- what we're saying in many say -- -- and I -- California Arizona as examples here because utility companies.

Are saying look these customers that have solar panels on their homes.

They're not using all the energy they're producing and we're having to buy it back from them because of the incentives in place by the Obama administration.

By these states and other saying hold on a second and backed or again -- particulars about to get rid of all these incentives they're trying anyway.

What that did -- -- sector overall and never gonna see some bankruptcies here because some of these stocks are already so beaten down.

Many years shareholders are as he's -- investors have been going to try to find on the sheet is seems to me that's that's the wrong strategy for the sector.

While there have been a lot of bankruptcies already and there need to be a lot more and that this is why SunPower had a 7% gross margin this past quarter.

Which by the way is not even the worse -- the industry.

The industry's production capacity foreign manufacturing solar panels exceeds.

Global demand by two to one.

How many other industries doing now where capacity exceeds demand by two to want it is this bad.

It needs to rationalize.

And that means they're in the absolutely have to be companies.

That go out of business shut down plants lay off workers I know it sounds harsh but it half -- -- -- yes and the SunPower for the record I don't think is going bankrupt but I do think that they will have terrible earnings.

On fat and eat that dies the year progresses for and then to give you some examples -- companies that could go bankrupt.

Chinese solar company called some tapped ticker STP yeah this to me is an absolute.

-- candidate for bankruptcy two billion dollars of debt.

I generating burning cash -- negative ebitda as far as the eye can see I think -- -- got you know critical think that this is a day as early us.

As early as next month doesn't it.

-- of this because the Chinese the panel makers in particular.

Other one of the reasons that many US solar companies are failing left and right a -- -- they favorite not -- you watch that sector appreciate a problem.

-- And democratic leaders were.

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