Q: What about other stocks you cover? A: First Solar was able to come into the market and quite impressively scale up a thin- film manufacturing process that allowed them to produce modules at a significantly lower cost than the crystalline polysilicon guys. At the time, polysilicon prices were at $200. I was saying they are going to $50 in 2009, and people said I was crazy. I said that photovoltaic module prices are going below $2. That's a major risk for First Solar, because First Solar modules have to be priced at a roughly 40-cent discount, given that they are less efficient than the crystalline polysilicon modules, and so you need more of them. This was when First Solar was in the 180s. Lo and behold, polysilicon prices went to $50 and First Solar's stock went to 90. It hit my price target, and I probably should have upgraded then. But, structurally, nothing has changed. Now the stock is back at 153. We're in an environment of $50 polysilicon right now and I would argue $30 by the end of this year, with photovoltaic-module prices of $1.80-to-$1.50 by the end of this year. At a $1.50, First Solar has to price its thin-film modules at $1.10. Their costs are 90 cents. So, that's not a 50% gross margin. Last quarter, they came out and announced this rebate program and basically proved my thesis correct.

Q: That doesn't sound good for poly producers like MEMC Electronic Materials [WFR] or Wacker Chemie [WCH.Germany]. A: Right. People were saying last week that MEMC would be acquired by Wacker. That makes absolutely no sense, and MEMC said just that. Then an analyst said that Wacker had negotiated 20% higher wafer prices, which suggests that demand is strong. In reality, Wacker Chemie hadn't said that. So I have a Hold rating on MEMC. In 2009, they should make 8 cents. MEMC just negatively pre-announced Q3, because of this supply issue. They had production missteps at their Pasadena, Texas, facility. They always call it a one-time event, but they've had a number of production missteps. Q: MEMC is now at 17.68. What's your price target? A: Nine bucks.

Q: What kinds of risks? A: In the first quarter, Suntech created an off-balance-sheet entity called GSF -- for Global Solar Fund. In their SEC filings and on a conference call, they described this as a separate entity that is buying Suntech panels. However, what they said shortly thereafter in questioning was that Suntech has an 86% interest in GSF. Suntech basically took modules out of its inventory and put them into the inventory of this off-balance-sheet entity and then recognized revenue on those modules. Beyond that, Suntech's costs aren't as low as those of the other Chinese module manufacturers. It has the largest commitment to purchase polysilicon at prices above where this material is trading today. Unless they renegotiate those contracts, they are at a structural disadvantage to guys like Yingli [YGE] and Trina Solar [TSL], which didn't sign long-term contracts at these predetermined prices. Another issue: To make a solar-power system, you take polysilicon, put it in a wafer, make solar cells from this and then assemble those cells into a module that can be installed on a roof. Trina and Yingli are vertically integrated all the way up through the wafering process; Suntech outsources its wafering. It's more expensive to do that. Q: Suntech's now 16. What's your target? A: My target is $9.

Q; What are your numbers for SunPower? A: For 2009, $1.3 billion in revenues and 98 cents in EPS. Now these are earnings that don't meet GAAP [generally accepted accounting principles], which is what the Street uses to value SunPower. The problem I have is that SunPower has among the highest stock-option expenses in the industry. If you look at SunPower's non-GAAP number, it is around 32 cents, that's how high their equity-option expenses are. For 2010, I see them with $1.8 billion in revenue and $1.11 in EPS. But with stock-option expense, 2010 is closer to 50 cents. Q: And you have a Sell rating on the stock, which is now around 30. A: A Sell and a $15 target.

Q: What about Trina and Yingli? A: I had Buys on them ahead of the big move. It was a pretty good call. I just realized that the Street wasn't factoring in the gross-margin upside. Then in Q1 and Q2 they guided to higher margins, and the stocks just ripped. They are definitely better-positioned because they have lower costs. This is a commodity market, and they eventually will be the winners. But even among the Chinese, there's competition. Trina is probably the best-positioned. They've worked through a lot of their inventory. However, for Yingli, there is significant risk of an inventory write-down, for Q3 or Q4. They've built significant amounts of inventory, and they've yet to write it down. And there is risk in their accounts receivable -- they are giving their customers price protection. So I'm a little more negatively biased on Yingli. Q: So with Trina now at 32 and Yingli at 12, your recommendations are... A: Hold. And I have price targets of 24 for Trina and 9 for Yingli.

Q: What about Trina and Yingli? A: I had Buys on them ahead of the big move. It was a pretty good call. I just realized that the Street wasn't factoring in the gross-margin upside. Then in Q1 and Q2 they guided to higher margins, and the stocks just ripped. They are definitely better-positioned because they have lower costs. This is a commodity market, and they eventually will be the winners. But even among the Chinese, there's competition. Trina is probably the best-positioned. They've worked through a lot of their inventory. However, for Yingli, there is significant risk of an inventory write-down, for Q3 or Q4. They've built significant amounts of inventory, and they've yet to write it down. And there is risk in their accounts receivable -- they are giving their customers price protection. So I'm a little more negatively biased on Yingli. Q: So with Trina now at 32 and Yingli at 12, your recommendations are... A: Hold. And I have price targets of 24 for Trina and 9 for Yingli.