First Solar analysis
First Solar posted pretty optimistic guidance for F2015/16 at the analyst coverage day conference this morning and the stock is up 12% ATM.
Management seems to have done a good job implementing business strategy but one comment from the CEO that concerned me was that (preamble - primary market is the US) they don’t have any intention of pursuing the development of any rooftop solar modules, which are expected to vastly outpace traditional solar module facilities, their current business model. Instead, they are focusing on penetrating foreign markets.
Definitely have some competetive advantage in module efficiency with economies of scale on manufacturing and installation; but would have liked to see them be a little more open to diversifying their business a bit to hitch onto the subsector with the highest growth expectation.
Also - the stock dropped 8% the day they released Q4 2013 performance because of delayed revenue recognition on the production of a massive solar facility ($400m approx). The stock regained 7% or so the following day.
Do investors get that caught up in the timing of rev rec? They’re using the completed contract method (although at this point not sure why, should be able to reliably measure costs and use %completion). The $400m is just going to sit in the pipeline through Q1 and possible Q2, at which time they’ll have a massive beat on normalized earnings guidance. There isn’t really any change in cash flows from that event occurring, it’s just a miss from earnings on paper.
I can’t really think of why anyone would react that sharply to such a small accounting item.
Thoughts?
First Solar (Originally Posted: 01/06/2013)
This company seems to be at a pretty attractive level to buy right now. Lowering cost per watts and obama re-election seems to be setting it off to the right direction.
According to its Q3 earnings presentation, it was said that their cost per watt current stands at 67cent, a huge reduction from ithe 2007 level of $1.23. Coupled with the climbing cost per watt from tranditional sources and increasing climate change worries, would First Solar be the new leader in the market place?
Opinions?
Disclosure: Recently long FSLR.
Sure as hell wasn't when we got crushed on it in high double-digits...
To be honest, I just love its recent price movement and am trying to attach a potential hypothesis.
Still too early to judge if solar is a good investment in my opinion. I expect cleantech to do well in 2013, but I'm looking more at natural gas than solar to be the sector's best performer.
^ agree with govsachs. Solar is just not attractive enough yet. It is getting better and more efficient so it could be a good longterm play. I would expose myself in a Solar ETF of some sort as opposed to a specific stock. Solar city doesn't seem too bad of an option. I think they will be the big guys in solar as time goes on
I would agree with Gov Sachs - I would rather buy a natural gas company, or an oil company with substantial nat gas exposure.
Solar is compelling, but it is really hard to pick a winner in the space. There are a lot of Chinese competitors that are benefiting from tremendous gov. spending. Also not sure how long Swanson's law will hold. All in all, it is a bit speculative yet.
Well. I am glad I got into the First Solar trade. :)
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