Things look sunny for Sunedison Inc (NYSE:SUNE) and SolarCity Corp (NASDAQ:SCTY), according to analysts at Deutsche Bank. They attended the Solar Power International tradeshow and weighed in on the current state of the solar industry in their report dated Oct. 23, 2014.
Sunedison, SolarCity to benefit from demand
After attending the tradeshow, analyst Vishal Shah and associate Jerimiah Booream-Phelps said they continue to believe that global demand and supply will keep improving next year. The improvements should drive momentum in solar stocks like Sunedison and SolarCity, they believe.
They do see some risk to consensus margin estimates for the third quarter. However, they say that the fourth quarter is already “shaping up favorably.” They also said investors are becoming more optimistic that the typical first quarter seasonality won’t be as bad as it has been in the past.
The Deutsche Bank team also reports that Chinese solar companies are having difficulties keeping up with domestic demand. As a result, the analysts think pricing could go up by a penny or two in the short term. They continue to rate Sunedison, SolarCity and Trina Solar Limited (ADR) (NYSE:TSL) as Buys “on any potential weakness.”
Strong solar demand in several markets
The analysts also said that they learned at the conference that demand for solar panels remains strong in several key markets, especially, the U.S., the U.K., China and Japan. In addition, they said tier one companies in China are turning away business because their factories are running at full capacity and they just can’t keep up.
In the U.S., they say fundamentals are still strong, with several participants in the industry expecting residential and commercial demand to rise by more than 30% year over year in 2015.
David Einhorn also likes solar stocks
Deutsche Bank analysts aren’t the only ones who like solar stocks and the near term future of the industry. Sunedison received a big boost this week after David Einhorn reminded Wall Street of his long position in the company and explained why he likes it at the Robin Hood Investors Conference. He also revealed a long position in another solar company, TerraForm Power Inc (NASDAQ:TERP).