Solar honeys JA Solar and SolarFun downgraded

The day after shares of JA Solar (NASDAQ: JASO) and Solarfun (NASDAQ: SOLF) skyrocketed, analysts Jeff Osborne and Adam Hinkley of CIBC World Markets have downgraded both, calling it time for investors to lock in profits. 

Good supply news from JingLong Group, a wafer supplier to both companies, was "interpreted as a proxy for the entire industry," the two wrote this morning, which they feel drove the 36% one-day gain in SOLF shares yesterday.

"We do not believe SOLF has seen any change to its wafer supply situation and would therefore use this as an opportunity to lock in profits."

The two said they believe the rally in JA Solar shares was sparked by a positive mention last week in an investment newsletter with a large technical trading following, and gained momentum when the JingLong Group, its main wafer supplier, announced that it will be receiving additional supply from silicon supplier Hemlock.

Solar-grade silicon has been in short supply because of high demand.

The two analysts say they're unsure how much of the Hemlock supply will come JA Solar's way.

They predict possible upside for JA Solar in 2008 from the announcement, and have revised their JASO EPS ests to $0.99 and $1.47 from $0.97 & $1.38 for '07 & '08, respectively.

Calling their current values indefensible for commodity PV cell/module suppliers, both stocks have now been downgraded by CIBC to Sector Performer.