The First Solar (NASDAQ:FSLR) roller coaster has lately been tilted upward.
After riding through the great recession at prices upward of $190/share, FSLR shares fell steadily through 2011 and at one point last year were as cheap as $12.80. Since then there has been a steady rise, peaking at over $55. They are now at about $51.
So what is it? What's going on?
First Solar suffered along with every other vendor from a vicious price war begun among Chinese polysilicon cell makers. That is abating, but the company is now left with stronger competitors using the technology. The good news is that First Solar doesn't use polysilicon. It uses what is called cadmium-telluride, or CdTe, whose raw material comes from mine tailings. The company has gotten the efficiency of its technology up to 16%, and its costs down near 60 cents a watt - not as low as some, but better than most.
More important, First Solar has found a way around the problem of pricing by building its own utility-scale systems, then selling them on to investors and power companies. These deals are money-makers, even when they cost slightly more than other grid energy. Utilities can re-sell their Renewable Energy Certificates in many creative ways, and in any case the supply from these plants peaks in the afternoon heat, which is when peak rates are being charged and air conditioners are on high.
First Solar has plants in both the U.S. and overseas, and has become willing to take lay-offs in its U.S. facilities when demand inches downward. The company devotes just 4% of revenue to research, and has yet to make a major acquisition, but it does have enough cash - over $1 billion - with which to buy new technology when it becomes available.
What you're buying, then, is a sustainable business model and proven management at an earnings multiple close to that of Apple (NASDAQ:AAPL). With growth prospects returning, with duties in place against the toughest competitors, and with costs declining toward grid parity, First Solar is on a sustainable path. Sustainable in the most profitable sense of that term.