First Solar, Inc. (NASDAQ:FSLR)

CAPS Rating: 2 out of 5

The Company designs and manufactures solar modules using a proprietary thin film semiconductor technology.

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Player Avatar TSIF (99.96) Submitted: 10/13/2011 1:15:16 PM : Underperform Start Price: $57.64 FSLR Score: +10.14

I've been pitching many Solar stocks up, (although I'm mostly losing) as they enter uncharted fresh bottoms territory. I think LDK, JASO, and a few others have some potential at the low levels, or at least the risk mitigated somewhat.

First Solar, however, has been so loved by analysts that while it's valuation in the mid-$50's is reasonably "fair", it's valued 5 to 6X it's China based peers. While investments in China have some risks due to transparency and government intervention, China has been propping up it's solar industry while the US let's it's decay. US Analysts have been propping up the US Solars even though they can't compete on cost. They can compete somewhat on a service basis, but selling panels short and making some back on the service/installation is a limited business model.

Overall, I think Solar, subsidies or not, is starting to catch on. I see solar panels sprouting on many rooftop, in grid arrays, and on construction signs. Overall, however, the competition is fierce and while US loyalty may help, it's all about the pricing at this point.

IN this case, both fundamentally, and certainly technically First Solar, even at 70% off it's 52 week high, has more to shed. The demand needs to meet capacity and until it does, the lower priced players have the edge. Revenue YoY is down over 35% and income by 65%. Breakeven isn't far away.

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