(Reuters) - J.P. Morgan Securities downgraded three solar companies, including industry bellwether First Solar Inc, and said oversupply would likely become a major issue in the second half of the year. In a note to clients, the brokerage said module makers continue to aggressively add capacity, even as supply begins to outstrip demand.
It downgraded First Solar Inc and Energy Conversion Inc to "underweight," and cut Evergreen Solar Inc to "neutral."
Following a difficult 2009, when the global credit crisis dried up financing for new projects and panel prices plummeted, demand has now begun to pick up, prompting a number of solar players to boost capacity.
"This feels eerily similar to what happened to the industry in C2H08-C1H09 when the market was oversupplied by as much as 30 percent for several quarters," J.P. Morgan said, adding that oversupply could approach 3 to 4 gigawatts (GW).
The brokerage also warned that falling average selling prices and subsidy cuts in Germany would further pressure demand and margins over the next year.
(Reporting by Adveith Nair in Bangalore; Editing by Anne Pallivathuckal)
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