First Solar, Inc. (FSLR)

I generally stay away from valuation shorts, but I just can't resist, at more than 100x 2008 projected earnings.

solar energy has been tarnished with cry-wolf syndrome for some years. but the thin film solar market is starting to explode now-- demand far overpaces supply, now more than ever with increasing green mandates. first solar should be a solid long play here.

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!

wow!!! um hey fools whats with the bad rateing??? awesome income statement and balance sheet, low debt, great insider ownership, and good p/e.uuummmmmmmmmmmm?????? if im missing something please post on it.

FSLR is without a doubt the leading solar energy stock in its class currently. Based on the increase in alternative energy demands, FSLR sales have increased exponentially and will continue to do so in the next year. I anticipate at least a 30% increase in stock price when the American economy turns around in the end of 2008.

A P/E of 788?

Seriously, I might check this company out to see if it has products that can save me energy costs, but it looks like earnings growth has to increase about 20x or even 30x to justify the share price.

No kidding the CEO just sold 250,000 shares.

Poly-Si prices are going down the drain, eroding First Solar's cost advantage in thin film. Oil prices are down too, and I have real reservations about how much of a boost Mr. Obama's stimulus plan will give to U.S. sales. Meanwhile, the Italian and German solar markets look weak, and the Spanish market has all but vanished. Prospects look dim for First Solar.

Overpriced at $286 (May 21, 2008), it should come back to the $225 level... and form a support base in that area, before advancing strongly again due to continued earnings growth. I expect they will grow their earnings over the next few years by 40+ %, and I will expect them to realize a P/E no less than 40 during this same period. As we approach the end of 2008, the P/E will be based upon the earnings of 2009, which is expected to come in around 5.60 per share. So, from now thru the 3rd quarter of 2008 will be a slow pull back to the $225 area and then FSLR should rebound nicely again in the 4th quarter of 2008.

First Solar, Inc. engages in the design and manufacture of solar modules through its proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. The company sells its products to solar project developers and system integrators in Germany.

The company tripled its revenue to $135 million in 2006 as compared to 2005 which shows the rising strong market demand for the company’s products. Increasing demand made the company to enhance its capacity; the company tripled its production volume to 60 megawatts during 2006. This increase in the production volume has further boosted the company’s position as the largest solar module manufacturers in the US and the largest thin film manufacturer in the world.

First Solar has also entered into long-term contracts with selected customers during 2006, totaling approximately to 1.5 gigawatts over the year’s 2007 to 2012 equating to approximately to $2.6 billion at an assumed exchange rate of $1.20 per Euro. These contracts have established First Solar as a market leader in large scale TV systems and provide multi-year demand visibility enabling it to continue to aggressively expand production capacity.

The company outperforms the industry on cost and margin, which gives it a competitive advantage over its peers in the market. Along with this the rapid growth rate of the solar industry and the thin-film sector is expected to help the company grow better as it has the advantage of being the market leader in the sector. Additionally with long-terms contracts through 2012 under its belt there is no looking back for the company in the future.

Best solar products in the world... nearly as cost effective as traditional electricity sources, but without the greenhouse gases. 20 forward P/E while growing revenue and earnings 100%/year? This is cheap.

Overdone. Hype. Bubble. What more can be said?

This company beat analyst projected earnings in Q4 2006 by 18 cents. The estimate for Q1 2007 is -2 cents and Q2 is -4 cents. FSLR just opened a new manufacturing plant in Malaysia and will be able to produce more product in coming months. FSLR uses a manufacturing process that costs considerably less than its competitors so sales costs are lower while profits are higher. FSLR will beat earnings estimates throughout the year.

This company has a proprietary technology for Sun energy conversion. They are developing many projects overseas. It will be interesting to see who gives them funding in the next 6 months.

My guess: this stock is seeing a initial growth (partly due to the recent attention that global warming has (finally) received in the mainstream press and the Bush administration) but will slow down.

alternative energy is in & solar products have dropped significantly in terms of production costs

Market Scan
Update -- Solar Demand Sparkles
R.M. Schneiderman, 03.27.07, 6:27 PM ET

The solar power market should continue to see robust growth, largely due to government incentives, declining production costs and the rising price of fossil fuels, according to a Monday report by Banc of America Securities.

"Although still a small part of worldwide energy production, solar...has enjoyed impressive growth since 2000," wrote Eric Brown, an analyst for Banc of America Securities, in a client note Monday.

Nonetheless, Brown said because the barriers to enter the solar market have diminished, investors should be "selective" as to which stocks to buy.

Indeed, manufacturers may eventually see prices and margins slide; China has emerged as a solar cell producer and thus increased the supply of polysilicon, which is used to make the cells.

Still, Brown said there are some good buys in the sector.

His top pick: SunPower (nasdaq: SPWR - news - people ), a San Jose, Calif.-based company that markets, manufactures and designs solar powered products and services.

"We favor...manufacturers that exhibit growth, scale, product differentiation, low cost production, low capital costs and vertical integration," he said.

Brown said that SunPower especially has a solid array of products and low capital costs.

He also has a "buy" rating on First Solar (nyse: FSLR - news - people ), a Phoenix, Ariz.-based solar module manufacturer that has "strong growth potential" and "low production costs," said Brown.

By the closing bell Tuesday, shares of SunPower were up 5.4%, or $2.30, to $45.12. Shares of First Solar fell 2.8%, or $1.57, to $55.44.

FSLR has a long-term cost advantage over conventional solar-cell producers because their proprietary technology uses much less of the expensive semiconductor materials (conventional PV cells use a relatively thick slab of silicon).

They are quite profitable now, and just finished a new lower-cost factory in Malaysia (current manuf. in US & Germany). So all other things equal, their profits should go up when the new factory comes online. Also, Malasia gave them a decade-long "tax holiday" as an incentive to build there. The new factory is an excellent deal.

Their financials are excellent: $122M net cash from ops, NO short-term debt, $130M LT debt, $1.6B assets. No risky securities investments (only for hedging supply costs and currency flows, and those instruments are fully marked-to-market). Revenue per employee is a fabulous $1.3M.

Currently almost all sales are in Europe for local (non-utility) PV applications. Customers get large subsidies from government, so they can charge relatively high prices. IMO the subsidies are unlikely to go away any time soon due to global warming, etc.

In 2007 FSLR acquired a US company specializing in utility-scale applications. This could open a mew market to them, giving them some diversification.

Basically, I see almost nothing to not like in their 10-Q.

Potential negatives:
* PE = 48, which looks bad.
* Could suffer due to high costs of starting the new factory,
or in digesting their acquisition. Expect higher R&D to
develop utility-scale products.
* Largest customer accounts for 21% of business.
* Many, many people are working on reducing PV costs, so eventually some stiff competitors will emerge.

First Solar (FSLR) has slid $100 to reaching $150 today intraday. I like the bleeding has stopped and this stock will be in favor for the rest of Q1. The company's P/E is astronomical, but its growth of 50% is easily justifiable. Look for solar stocks to outperform in the short-term and very long-term. -JC

PE is ridiculous but the sun is hot. Thin film cells made from waste products? Double score for the environment.