Suntech Power Shares Popped: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of solar manufacturer Suntech Power (NYS: STP) jumped 13% in early trading only to fall to a gain of 4% as I am writing on low volume.
So what: The big news today was word that Suntech and JA Solar (NAS: JASO) would cut down production of their solar facilities due to a glut of supply in the market. Mr. Market first cheered the move and then scratched its head, wondering what that really meant for solar manufacturers.
Now what: I've been wondering for some time how exactly the industry was going to handle oversupply, considering the incredible leverage Chinese manufacturers have built into their businesses. They're currently selling modules at cost, or close to cost, indicating that supply needs to come down somehow. That means either a number of bankruptcies or everyone cuts back on manufacturing.
My bet is that Chinese manufacturers as a whole won't have the guts to cut down on supply and this will only push Suntech toward the brink faster. This is one stock I think is in real trouble, and I wouldn't be buying the pop today.
Interested in more info on Suntech Power? Add it to your watchlist byclicking here.
At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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