Suntech Power (STP) is out this morning with a decent quarter – people will say its a “good quarter” or a “great quarter” – I disagree – at this point I cannot trust management to forecast anything because they “beat” by such a wide margin (especially on revenue) after disappointing so badly last quarter, yet guiding revenue far lower. How they continuously are unable to forecast 90 days out is a mystery to me – in fact it is NOT even 90 days out – they report half way through the quarter so when they issue guidance that means there are about 45 days left in the quarter – yet they constantly miss by a lot (either up or down). This shows me a company that has poor internal forecasting, and over time if this continues the Street will punish them. And it’s not a matter of sand bagging because some quarters they beat by a lot, and some quarters they miss by a lot – no consistency. The Street likes predictability. Just my opinion. Further they are still banking on a boffo 2nd half of 2008 to make their full year number; still a lot of risk to that scenario. While their size and scale should help them in the long run, I am frankly tired of their inability to come anywhere near to their guidance in any quarter.

• Total net revenues for the first quarter of 2008 were $434.5 million, representing an increase of 76.1% from the corresponding period in 2007.
• Non-GAAP gross margin for the Company’s core wafer-to-module business was 23.3% and non-GAAP consolidated gross margin was 22.5%. The gross margin increased from the fourth quarter of 2007 primarily due to an increase in the average selling price driven by strong demand for Suntech’s solar products, which was partly offset by increased silicon wafer costs.
• Non-GAAP net income for the first quarter of 2008 was $60.6 million, an increase of 85.2% year-over-year, or $0.35 per non-GAAP diluted ADS.

That said, I am more bullish on the prospects for Trina Solar (TSL) after seeing all the other earnings reports in the sector. Even the worst of breed are beating expectations since a lot of trends in the sector seem to have improved this quarter. Yesterday I took a 2%+ allocation in Trina off the table to protect gains in case STP disappointed [Bookkeeping: Cutting some Trina Solar on Solarfun beat and Suntech Power Earnings Tomorrow], so with Trina’s stock down about 6% from that selling point, I am going to add part of yesterday’s sale back. I would add more if I believe in the market overall, or the solar sector had not run so much and was due for a pullback. Unfortunately for Trina they are probably going to be reporting earnings into a sector sell off – so I am not going to get the position back up to what it was. I do believe they will do very well this quarter but could be a victim of timing; or better said, if Trina Solar traded in an absolute vacuum I’d be willing to make this an even larger position. This sector is ripe for a major pullback unfortunately.

That said, I’m adding back here in the mid $48s to $49 and taking the position back up to 5.4% of portfolio. (up from 4.6% going into the day) I’ll potentially add more on a pullback to $46 area. I believe fair value is far, far higher, although these names trade together so if the sector sells of, fair value will mean nothing to the speculators who run in and out of this sector. If there were less speculators and more investors in this space, Trina’s stock price would be far higher. This continues to be a large, missed opportunity by the Street in my opinion. We’ll see what earnings holds in the coming weeks.

Long Trina Solar in fund and personal account

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