Miami, FL - January 23, 2013 (www.investorideas.com newswire) EmergingGrowth.com, a leading digital financial media company, Reports on LDK Solar (NYSE: LDK). Discussion also includes MEMC Electronic Material (NYSE: WFR), Yingli Green Energy (NYSE: YGE) and JA Solar (NASDAQ: JASO). After some brutal years, the solar power industry seems set for a rebound. Since the start of 2013, this entire sector has been going through a rally. One company in particular, LDK Solar Corporation (NYSE: LDK), is particularly attractive for investors looking to move into solar. The last few years have not been kind to the solar power industry. This industry has a high Beta so market downturns like the past recession take a bigger hit on share prices. In addition, the recession caused oil prices to go down which cut into the margins of solar power companies. Lastly, the price of solar panels fell significantly which forced companies to mark down their inventories. Altogether, these events decimated solar stocks. LDK lost about 96% of its value over the past five years. Competitors like MEMC Electronic Material (NYSE: WFR) and Yingli Green Energy Holding Corporation (NYSE: YGE) had similar collapses. However, China is bringing the industry back to life. Over 2012, China nearly doubled its production of solar energy. By the end of 2013, China has the even more ambitious goal of increasing solar capacity from 7GW to 17GW. This is going to be a huge boost to the demand for solar panels and the market had a big positive response to this news. Many companies saw their share prices go up including LDK, whose share price has nearly doubled since the start of the year. There's reason to be optimistic about more good news ahead. China needs clean energy. Beijing recently made the news for setting record levels of pollution; the air was so bad, it was a health hazard to go outside. This can't keep going on and China knows it needs sources of clean energy like solar power. Going forward, LDK should see further revenue growth form this increasing Chinese demand. In addition, the World economy is improving. The high Beta that crushed solar stocks during the recession should lead to a big upswing as the market swings back up. LDK with a high market Beta of 3.37 should be particularly sensitive to market gains. Remember that this was a stock trading at nearly $50 in 2008. With a current market price of $2.04, LDK has a big upside if it can regain lost ground. One last factor that can't be overlooked is that LDK is a Chinese company. If the leading buyer of solar panel is the Chinese government, what companies do you think they're going to support? The solar industry is still weak and companies are recovering from badly damaged balance sheets. LDK holds barely over $100 million of cash compared to over $3 billion of debt and it has a soaring debt to equity ratio of 908. This dismal situation is fairly standard across the industry. It's going to be tough for solar companies to get out of this mess and not all of them are going to survive. The Chinese government doesn't want one of its major employers to bankrupt though and has given multiple loans and other financial aid to LDK. Considering the political disaster of Solyndra, do you think an American firm like JA Solar Co. (NASDAQ: JASO) can count on similar support? It's doubtful. LDK still have many problems and the path to success is going to be a long one. However, if LDK can hold on, this stock could turn out to be a huge winner over the next few years. http://www.investorideas.com/news/2013/main/01233.asp |