Solar: Goldman Launches; Says Buy FSLR, JASO; Sell WFR, STP

Goldman Sachs analyst Mark Wienkes this morning launched coverage of the solar sector with a Neutral rating on the group; among U.S.-based companies, his best Buy idea is First Solar (FSLR), while he cites MEMC Electronic Materials (WFR) as his best Sell idea.

“We initiate coverage of the U.S. solar industry with a Neutral coverage view,” he writes. “We see benefits from large-scale projects ultimately overwhelming near-term challenges and accelerating the transition from subsidized markets towards parity.”

Wienkes contends that utility projects in the U.S. and China will drive the industry toward pricing parity with other forms of power generation int he 2012-2015 period, “sooner than the Street expects.”

The analyst writes that the firm’s global solar research team sees demand reaching 13 GW in 2010 and 17 GW in 2017, about 20% ahead of consensus, driven by stable project returns despite lower subsidies. “We believe higher-than-expected demand and price declines will accelerate the profit share shift from high-cost European manufacturers to First Solar and low-cost producers in China.”

Here’s a rundown on his stock calls on the group:

• First Solar: He sets a Buy rating and $150 price target, asserting that “increasing exposure to U.S. utility scale installations should solidify visibility into our above consensus 2011 EPS and dredge a wider competitive moat for First Solar.”
• SunPower (SPWRA): Neutral rating, $15 price target.
• MEMC: Sell rating, $9 price target. He says there is more risk than reward, given a “below consensus and sub-peer margin recovery, higher executive risk and lower expected returns given a more capital-intensive business mix and lower financial flexibility and a higher valuation than is commonly perceived.”

Meanwhile, analyst Amy Song picked up coverage on five China-based solar stocks. Here’s a rundown:

• JA Solar (JASO): Buy rating, added to Conviction List. $7.50 target price.
• Suntech (STP): Sell. Target price, $8.40.
• Trina (TSL): Neutral.
• Yingli (YGE): Neutral.
• GCL-Poly Energy (3800.HK): Neutral.

Song writes the Euro/dollar exchange rate will be “main swing factor” for the stocks in the near-term; for the medium-term, she thinks “asset light midstream manufacturers” should provider better cash returns and better weather declining average selling prices.

Song writes that she likes JA Solar for a relatively low risk profile, improving cash returns, and a stronger balance sheet than peers.

Suntech, she says, has an “unwarranted” high P/E of 16x 2011 “given its lower cash margin and stretched� balance sheet.”

In today’s trading:

• FSLR is up $3.57, or 3%, to $122.83.
• WFR is down 26 cents, or 2.4%, to $10.40.
• SPWRA is down 17 cents, or 1.3%, to $13.10.
• JASO is up 21 cents, or 4.4%, to $4.99.
• STP is down 10 cents, or 1.1%, to $9.44.
• TSL is up 17 cents, or 0.9%, to $18.50.
• YGE is up 4 cents, or 0.4%, to $10.72.