Long-Time Bear On Why Solar Demand In '16 Could Be 'Worse Than Imagined'

• While shares of Sunedison Inc (NYSE: SUNE), JA Solar Holdings Co., Ltd. (ADR) (NASDAQ: JASO), Trina Solar Limited (ADR) (NYSE: TSL) and SolarCity Corp (NASDAQ: SCTY) have gained significantly over the past one month, Yingli Green Energy Holding Co Ltd (ADR) (NYSE: YGE) shares are down.
• Axiom’s Gordon L. Johnson II has Sell ratings on all the companies.
• The world’s top-3 solar markets could witness a y/y decline in PV demand in 2016, Johnson said.

Analyst Gordon Johnson mentioned that global PV demand could be “worse than imagined” in 2016. The reasons cited were:

1. China’s National Energy Administration, or NEA, has projected the 2016 PV installation target at 15GW, representing a 15.7 percent decline from the 2015 target of 17.8GW. China is the world’s largest market by far.
2. Japan, which is the world’s second largest market, witnessed a y/y contraction in installations for the first time ever in August. Japan installed about 70MW of residential PV and around 580MW of non-residential PV in August, which means a combined 770MW, implying a decline of 15.6 percent m/m and of 5.8 percent y/y.

“Thus, given our view that Japan’s + China’s + U.S. installations are likely to fall in ’16 (i.e., the top-3 solar markets that together comprise ~70% of global demand in ’15, according to our prop. supply/demand model), amid structurally widening oversupply of PV modules (i.e., our work points to an incremental ~10GW of planned capacity in ’16), we see imminent downside risk to PV prices in 1H16.” Johnson wrote.