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Does JA Solar's Bounce Mark a Bottom For the Solar Sector?

Following a reported loss yesterday of more than three times what analysts were estimating, JA Solar shot up almost 25 percent today on a lone analyst's upgrade from "Neutral" to "Buy", Forbes reports. The analyst, John Hardy of Broadpoint, thinks that the dismal demand levels that led to JA's loss have bottomed out, and sales will increase rapidly from here on out.

According to Hardy, solar panel pricing is beginning to stabilize this month, which would indicate rising demand. Other analysts are also expecting a rebound, and suggesting that sales will multiply through the rest of this year.

Supporting this thesis is the fact that more money is moving into the cleantech sector. The number of private equity funds dealing in cleantech is continuing to grow, and some of their investments go to project development. In the United States, local programs encouraging businesses and individuals to invest in rooftop solar are also on the rise. And some companies also claim to see a rise in demand. Solarfun, which also just announced its earnings, beat expectations and says that it is "cautiously optimistic for a more meaningful rebound."

However, most calls are for growth to resume in the second half of this year -- and we are still firmly in the first half. Quite a few companies are still holding excess inventory, which they'll need to work through. Quite a few short sellers are also betting against the sector, taking up positions against companies like SunPower and LDK Solar even as their share price heads upwards.

One of the companies with significant short interest against it is Suntech Power, which is headed to its earnings tomorrow. Suntech has been making some aggressive moves of late, but that doesn't mean it will necessary post strong results this time around. For now, disappointing results could still keep the solar sector down.

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