First Solar: Why I'd Never Go Long

| About: First Solar, (FSLR)

Barron's wrote about First Solar's (NASDAQ:FSLR) weaknesses and competitive threats this past weekend (Reuters coverage of Barron's commentary here), and an analyst, FBR Capital Markets, followed up Barron's with a downgrade on Tuesday morning.

The FBR analyst, who slapped an "underperform" rating on FSLR, mused that

recent checks indicate at least one of First Solar's top customers has already switched from First Solar to a silicon-based module vendor for a project that is currently under construction.

The Yahoo! article covering the analyst downgrade elaborated.

Hosseini noted that FBR's meeting with the KfW Bank Group, a Frankfurt-based development bank that lends especially to economic, social and ecological projects internationally, revealed that its year-to-date photovoltaic project backlog has shifted dramatically toward silicon-based modules compared with its 2008 thin-film-focused mix.

I have previously drawn similar conclusions on this blog and on Student Stocks. First Solar is a company that is ALREADY overvalued even before considering the significant, growing competition that they face from both silicon-panel makers and thin-film outfits. Though the share price unfortunately increased after my last article, I made (real) money in the past shorting FSLR from $280 to $140. Though shares have fallen $20 (10%) since the Barron's and FBR pieces, shares still should have plenty of downside room. I tried to short FSLR a few weeks ago (shares were at levels similar to today's price) but none were available.

I continue to dislike FSLR shares at this price, in this environment. I'd never go long, and I will be considering initiating a short position.