ReneSola released strong results Tuesday, but investors seemed only to see dark clouds.

The Chinese manufacturer of solar wafers reported a roughly fourfold increase in second-quarter profit on strong demand and a jump in customer numbers.

But ReneSola (nyse: SOL - news - people ) shares fell 2.5%, or 44 cents, to $17.49 on Tuesday at the close even though other solar stocks rose.

Piper Jaffray analyst Jesse W. Pichel said investors reacted to a change in accounting for a small polysilicon facility. He said the accounting change added 200 basis points to gross margins, making the reported gross margin 24.7% in the second quarter, even though Pichel said the core gross margin was 22.4%, up from 22.1% in the first quarter. “The Street thinks the margins are coming down, but they’re not,” he said. “The company said the margins will remain stable for the balance of the year.”

On Tuesday the company reported second-quarter net income rose to $23.3 million, or 38 cents per American depositary share, from $5.9 million, or 12 cents per American depositary share, in the prior year, beating analysts’ estimates of 32 cents per share.

Revenue more than tripled to $173 million from $44.5 million a year earlier, well above analysts’ expectations of $141.3 million.

The company reported that expenses for research and development were higher than anticipated, which Pichel says limits the upside for the near term. Total operating expenses in the second quarter increased to $8.3 million, up from $4.0 million in the first quarter of 2008 because of a substantial increase to invest in developing alternative silicon feedstock materials.

Meanwhile on Monday Trina Solar (nyse: TSL - news - people ) reported higher second-quarter sales, but profits came in below the consensus estimate because of higher polysilicon costs. (See " Trina's Lukewarm Quarter") Pichel said solar companies should be differentiated by their polysilicon contracts. ReneSola has its polysilicon supplies under contract at reasonable prices, which is why unlike Trina it did not guide margins down for the second half of the year.

For 2008, ReneSola raised its revenue guidance to a range of $640 million to $670 million from a previous range of $570 million to $590 million. Analysts expected full-year guidance of $612 million.

Pichel raised his estimates on ReneSola and reiterated its “buy” rating and $35 price target. He boosted the company’s fiscal year 2008 revenues estimates to $663.1 million, up from $622.1 million and earnings per share to $1.43 to $1.50. He boosted his fiscal year 2009 revenues estimates to $1.2 billion, up from $969.1 million and earnings per share to $2.82, up from $2.42.