If you have a heart of stone and can handle volatility, then consider adding First Solar (FSLR) into your portfolio. FSLR, a global leader in solar energy, was supposed to report its earnings on April 29, 2013. But the company moved its earning date to the following Monday, May 6. I have to admit, I was nervous when it did that, since it didn't explain why. The move left some of us confused. Several thoughts went through my head. Is this the end of the run for FSLR? Should I prepare myself for a deep sell-off?
After the market closed on May 6, FSLR reported its first-quarter earnings for 2013, and it missed the analysts' estimate by 6 cents. I was a little taken aback. How could it miss? Just a few weeks earlier, on April 9, its CFO had given a positive outlook for 2013 thru 2015. I thought for sure it would at least meet the estimate. I guess the company was optimistic and underperformed. But FSLR didn't see a sell-off. In fact, it was up a little during after-hours trading on the evening of May 6. So I looked at it as a bullish indicator on FSLR. Until the following day.
On May 7, the day after the earnings report, FSLR opened lower and continued to descend throughout the day with decent volume. It dropped $4.26, 8.9 percent, to close at $43.43. I can almost see the smiles of the short-side investors, the nonbelievers, that day. As of this writing, about 28 percent of floating shares are being shorted on FSLR. Before the first-quarter earnings report, it was 30 percent. This has both negatives and positives. It's negative because too many pessimistic investors betting against the stock can keep new investors on the sidelines and away from FSLR. On the other hand, we can look at it as a positive because if the stock continues to go higher, then those same people who bet against it will quickly cover their short positions, and that will help push the stock higher faster than they can say, "Sell in May and go away." However, the sell-off didn't hold. It turned out to be just some profit taking. The very next day FSLR climbed back up, and now it's sitting at a 52-week high of more than $50. I believe FSLR has upward momentum and will go higher.
You may wonder why FSLR didn't have a follow-thru sell-off, and instead moved higher. Well, if you look closely at the first-quarter report for fiscal year 2013, it isn't bad. Sure, first-quarter earnings of 69 cents missed the analysts' estimate of 75 cents, but analysts frequently miscalculate earnings estimates. And 6 cents is hardly a major miss anyway. If we compare the first quarter of 2013 with the first quarter of 2012, it's a big improvement in all aspects of the company's balance sheet and business. It reported 1Q 2013 profit of 69 cents per share versus a loss of 8 cents per share in 1Q 2012. Net sales rose to $755 million in 1Q 2013 from $258 million in 1Q 2012 - that's an increase of 192.6 percent. Company cash at the end of the 1Q 2013 is about $1 billion, an increase of $262 million, or 35.5 percent, from the 1Q 2012. That is a good number. The company also maintained the full-year 2013 financial guidance as stated on April 9, during its Analyst Day event. Compared with its peers, FSLR is a profitable company, a true leader in the industry, and dominates among its competitors.
Looking ahead to the next quarter and beyond, what catalyst could lift this stock even higher? As world demand for alternative clean energy increases, FSLR is poised to benefit. The company is a global leader in photovoltaic , or PV, energy solutions, and with its $1 billion cash reserve, I believe it will continue to acquire and expand. When any company is in an acquisition phase, that's a good indicator that it's looking to grow and improve its pipelines and balance sheet. As investors, that is what we look for in a company. FSLR announced on April 9, that it is acquiring TetraSun from JX Nippon Oil & Energy Corp., a privately held solar PV technology company that has developed a breakthrough cell architecture capable of conversion efficiencies and simpler, cost-effective processing. Acquiring TetraSun will help FSLR to grow and gain even more market share going forward, especially in Japan. It also will help FSLR with its future products line and growth. FSLR plans to use this new technology to begin commercial-scale manufacturing in the second half of 2014. Ongoing acquisitions and innovations will be an ongoing catalyst to keep investors interested.
Another reason I'm bullish on FSLR is its CEO, Mr. James Hughes. As an investor and trader I like to hear a CEO make a positive statement about his company, because no one knows the company better than its CEO. On April 9, Hughes said, "I believe in my company, I believe in the industry and I believe that the energy world is just beginning to understand the capabilities of photovoltaic products." And on May 6, Hughes reaffirmed his company guidance, saying, "We demonstrated progress on several fronts during the first quarter, including continued strengthening of our balance sheet and additions to our pipeline. We remain on track for the year and reaffirm our full-year 2013 financial guidance and are focused on achieving our goal of new bookings to shipments ratio of one-to-one." Despite the shortfall of its 1Q earnings estimate, confirmation of its full-year guidance remains intact. That is one of the reasons why FSLR will continue to be on the upside.
While FSLR has already gained over 66 percent year-to-date, I believe it still has more room on the upside. I would still buy FSLR as a long-term holding at this level. I, too, believe in its ability to provide solar energy systems and to help subsidize global energy demand into the future. I'm more bullish that FSLR will stay as a leader thru its acquisition and innovation. Will its stock get to $300 again? I'm optimistic that it will. With its efforts to improve the balance sheet and its continued perseverance to acquire and expand its business, I believe FSLR will keep investors and analysts intrigued going forward.