What drives solar stocks?

>> To give you some perspective on what happened last year and why these stocks took a big dive down, the first, the top portion of this slide basically shows consensus street estimates for--these are cumulative estimates for all the U.S. and the Chinese companies. And you look at the slide and you see how Wall Street has been looking at earnings potential for these companies. These are forward estimates, one year out earnings, potential. And you can look at some time in October what happened to the earnings potential or expectations for earnings. And that really drove, that really drove the stock prices down. A lot of this is obviously exchange rate currency impact, the credit markets, seasonality, inaudible effects. A lot of that was the drivers. But if you look at really the growth expectations even today for the Chinese and the U.S. smaller companies, you're still looking at really attractive earnings growth. You're looking at consensus estimates going from $1.50, let's say, 2009, cumulative, for all the companies, to almost $6. I don't think you have many other sectors that show this type of earnings growth. The problem with earnings growth, though, is this is happening in a backdrop of declining subsidies, more competition, and, you know, ever-challenging financing environment. So investors really don't want to pay a high multiple for these type of earnings. So I think what you really end up seeing is a potential market opportunity in some of the key markets that we have talked about. And I wanted to just highlight the U.S. market. I don't want to talk about China because the results of the China is not going to be that meaningful, at least until, you know, 2010, late 2010. The U.S., I think, is actually going to be a very important market, more so, in my view, for the commercial segment, particularly just because these are small projects. You can easily get distributive generation projects done. There are a lot of investors who would be willing to, you know, invest in small projects for the attractiveness of the yields in many of these markets. And by the way, assumptions here on this chart are very conservative. With the panel prices that you have seen today, the yields are going to be, you know, not 10%, but more like 15%, even with the higher cost of financing. So our view is that with the current cash grants program over the next three years, the U.S. commercial sort of market could be as high as four gigawatts. And this is, of course, a very top-down view. But this is also validated by a lot of the installers that we've talked to. We think that, you know, there's a lot of activity happening, which, of course, is now really waiting for the commercial, the cash grants and the DOA program. So again, large scale sort of volume growth really is going to be the key driver for investors that are looking to invest in the stock. And I think that there are many markets that are basically providing incentives. And we think that as you get closer to inaudible, more and more governments are going to come out with incentives. That has been our view. And I think we've seen that this year, for instance, you know, for whatever it's worth, China, and even India and Japan, came out with new programs to support solar. We already know there's a lot of push in the United States. And then a lot of further markets in Europe are also coming out with new incentives. So I think the incentive outlook for the overall sector is improving, even though some of the key markets like Germany may be slashing incentives maybe even harder than what everyone is thinking.

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