Citigroup (NYSE: C)’s equity research team made comments on solar stocks and the impact of lower natural gas prices which is being overlooked on a short-term basis. The prompt month natural gas contract has dropped by more than 30% since early January and the spot prices ($4.00 / MMBtu) are close to their 10 year record lows.
The company also commented that MEMC Electronic Materials (NYSE: WFR) and First Solar (NASDAQ: FSLR) are two of its favorite companies in the two industries.
Citi analyst says, “Natural gas prices are notoriously volatile (they were approaching $14/MMBtu less than 2 yrs ago), but significant new supply and a general decline in electricity demand in the U.S. now appears to portend a sustained period of lower power prices. So, while the Street is now broadly bullish on a short-term basis given temporarily stable pricing trends and a clear segmentation of Tier1/Tier 2 bankability, we would not chase stocks given a combination of lower power prices, increasing pressure on subsidies around the globe, a wave of new capacity from Tier 1 players and outsized demand expectations for 2011. MEMC Electronic Materials (NYSE: WFR) is our favorite name on a relative basis while we also like First Solar (Nasdaq: FSLR), but less so.”
