BUY OR SELL-Solar stocks are low, but are they a good buy?

* Subsidy cuts, weak European markets cast shadow

* Sales still strong for the year

* Analysts mixed on solar outlook through year end

By Dana Ford

LOS ANGELES, June 21 (Reuters) - Shares of solar power companies have been hit hard this year by the one-two punch of a weak euro and concerns about the strength and stability of their largest market -- Europe.

At the same time, demand has surged ahead of scheduled subsidy cuts and most analysts say new government incentives in places like China and the United States will eventually prop up support for the renewable power source.

Since the start of 2010, the Wilderhill Clean Energy Index .ECO, an index made up of green energy companies, has sunk 18 percent. The S&P 500 .SPX, by comparison, has dropped less than 1 percent since January. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on solar stocks: link.reuters.com/mak33m ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

China's decision over the weekend to loosen controls on its currency, which some analysts say will translate into a gradually stronger yuan, will also likely help solar companies that export to China, while it could hurt Chinese manufacturers that sell overseas. [ID:nSGE65K0J8]

Are strong sales and relatively low-cost stocks in the solar sector enough to bring investors back, or is uncertainty about public policy and Europe casting too long of a shadow?

Three analysts weigh in:

ROB STONE, COWEN & CO ANALYST

"What will happen is, unless the euro does something unexpected, numbers will be better than people are thinking through the end of the year for many of these companies.

"We're not recommending names across the board ... But in terms of the price performance leaders -- which would include names like First Solar (FSLR.O), Trina Solar (TSL.N), or SunPower SPWRA.O -- we think the second-half demand picture, and pricing, looks better than what people were probably thinking, in particular for companies that are in a position to add capacity this year.

"We think there are some legitimate but improbable fears out there. It's a legitimate fear that if the euro goes to $1, that's a problem for solar stocks, but we think it's unlikely that the euro is going to go to $1.

"The stocks got clobbered in the first half of last year, too, and people who bought them around their lows last year -- not all of them, but the better ones -- did quite well through to the end of the year."

SAM DUBINSKY, WELLS FARGO SECURITIES ANALYST

"Right now, demand and numbers in the industry are pretty good. But there's a lot of uncertainty due to the euro and due to declining subsidies. Investors don't want to be the first one to enter these stocks. They don't want to be the first one given all these uncertainties.

"There's just not much support for the space. You see these short-lived rallies, but they're just not that sustainable.

"In the near term, I like owning companies that have less euro exposure, and that are benefiting from industry bottlenecks.

"My top pick is ReneSola SOLA.L(SOL.N) -- it's a wafer company. They make and sell in Chinese currency. So they see less direct impact from a declining euro, and wafers are also an industry bottleneck today, which supports a firmer pricing environment.

"In 2010, I would think pricing's OK for Q3, maybe even half of Q4, but I think heading into 2011, there will be a pricing correction, that's for sure."

HENDI SUSANTO, GABELLI & CO ANALYST

"Many companies expect that pricing trends will be benign in Q3 following the feed-in tariff reduction in Germany, but I think there are downside risks of ASP (average selling price) declines and a demand slowdown that may lead to order cancellations.

"I'm more pessimistic than the market for the second half of 2010.

"I have a buy (recommendation) on MEMC (WFR.N) and First Solar ... For MEMC, they sell semiconductor and solar wafers, and we are seeing a price increase in semiconductor wafers. For First Solar, I like their story. I believe they have a strong position to become the largest player in the utility space." (Reporting by Dana Ford; Editing by Gary Hill)