SunPower Corporation (SPWR), First Solar, Inc. (FSLR): How Should You Play This Space Here On Out?

Both companies have produced less power in the first quarter of 2013 compared to 2012. E.g. SunPower Corporation (NASDAQ:SPWR)’s production reached in the first quarter 208 Megawatts – nearly 30% drop (y-o-y). The company still has more than $0.5 billion in cash so it is capable of maintaining its operations in the coming years at these low profit margins.

Shares of MEMC Electronic Materials (NYSE:WFR) also rallied during the year (up to date) by more than 66%. This company manufactures silicon wafers for the semiconductor industry. A few years back the company also started to manufacture solar wafers. Based on its2013 projectionmost of its growth will come from its solar energy systems that are expected to rise by 10% to 28%. Its semiconductor revenues are expected to rise by only 2.4-7.8% (y-o-y). Nonetheless, the price of Solar Energy Systems is expected to fall from $3.79/w to $3.10-$3.40/w – between 10% and 18% drop. This drop in price is likely to further pull down MEMC Electronic Materials (NYSE:WFR)’s profit margin in 2013.

I think solar power is likely to keep growing fast, which will reflect in growing revenues for leading solar panel manufacturers. But the high competition, huge investment costs and falling prices are likely to keep this sector with low profit margins. Therefore, I don’t this industry won’t lead to a positive return on investment.

The article Is it Worth Investing in Solar Energy? originally appeared on Fool.com and is written by Lior Cohen.

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