First Solar, Inc. (FSLR)

BeezerFool (< 20) Submitted: 11/10/07 9:05 PM : Start Price: $200.50 FSLR Score: 49.98

FSLR enjoys a huge competitive advantage in the fast growing solar market because of its thin film technology. According to Goldman Sachs (Target $275) "they are producing solar at $1.19/watt versus others at $2.50-$3.00/watt".





Consequently FSLR is exceptionally fast growing and profitable. Goldman Sachs is forecasting EPS 3 year CAGR of 343% to 2009. Gross and net margins before tax are estimated to rise to 52% and 32.5% respectively in 2009 with net margin before tax continuing to rise to over 42% 2014.





The consensus view is that the solar market will continue to boom for the foreseeable future e.g Lehamn Brothers "We expect the solar market to triple over the next five years as ongoing government incentives and accelerated cost reductions make solar electricity attractive in several regions of the world."





However growth of all FSLR's major competitors is constrained by the shortage of polysilicon as they strive to meet booming demand. FSLR is a rule breaker because they do not suffer this growth constraint because their thin film process does not use polysilicon.





The only constraint to FSLR's growth is their ability to ramp up production. Every few months FSLR announces new long term contracts with large blue chip customers and new manufacturing facilities to meet guaranteed demand.





The latest quarter results impressed the market because FSLR brought their new German factory on stream months ahead of schedule, proving their ability to ramp up production exceptionally fast. They are planning to bring 4 new production lines into production in Malaysia in 2008 and 2009. They are now researching and planning new facilities to be announced.





Goldman Sachs are forecasting that FSLR will ramp up production from 56MW in 2006 to 1,082MW in 2010. Lehman Brothers bull case (which they believe the most likely) is that FSLR will reach capacity of 1,269MW in 2009!





FSLR is also a rule breaker because unlike most hyper growth companies its growth is likely to accelerate from 2010/11 onwards!





The Holy Grail of the solar industry is to reach "Grid Cost Parity" i.e the cost of producing solar electricity is equal to or less than by conventional carbon fuels such as gas, oil and coal etc (arguably FSLR's costs are already lower than nuclear once the true nuclear de-commissioning costs are factored in).





FSLR's latest quarterly results show that they are ahead of schedule in their road map to increase efficiency and to reduce costs and will reach grid cost parity ahead of previous expectations - possibly as soon as 2010/11, years ahead of their competition.





Put simply, by 2010/11 FSLR with their clean solar energy will be able to start to compete head on without subsidies against conventional energy generation opening up a market measured in trillions of dollars - as against total global solar sales which are presently only around $17 billion a year.





So FSLR's growth and profitablity is likely to accelerate in 2010/11 onwards as it reaches grid cost parity years ahead of its rivals.





FSLR is today what Microsoft was in the early 1980s. Do your research and get on board!

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