Taking a Bath Shorting First Solar, Inc.

As most of my readers know I have been short First Solar (FSLR) for a while now.  I was successful in shorting First Solar the first time but got burned the second time.  Let’s just say that I am down more than 50% shorting First Solar.  I probably should have closed my position before going on my vacation since First Solar’s earnings release was in the middle of my vacation. I thought about closing my position right before the earnings release but decided to stay put.  Well, First Solar ends up reporting an incredible quarter and the stock goes from low 30’s to low 50’s in a matter of days.  The stock is currently sitting at $46.27.  The only positive from all this is that my loss in dollar terms is not too significant even though I am down more than 50 percent.  

So now should I close my position and take a loss or add more to my short position to get even or even turn a profit? 

First Solar, Inc: 

• Market Cap: 3.35B
• Trailing P/E:  680.44
• Forward P/E:  56.43
• Price Sales:  25.66

I still think it’s overpriced.  Now don’t get me wrong.  The stock should justify a higher premium due to their thin film technology and the fact that they don’t use polysilicion which is expected to be in short supply at least until 2008.  They also have some of the lowest manufacturing costs in the business and are showing incredible growth. The company definitely has a bright future.  However, I am looking at short term downside at this point.  The IPO lockout period should end in a couple of months and we will probably see large insider selling.  Right now, I will keep my short position but at a certain point I would consider going long First Solar.

Full Disclosure:  I am currently short FSLR.

FSLR 1-yr chart:

Comments

[Andrew Ling:]

I went long 3000 shares almost the exact time you went short back in Feb, the day before the first earnings report. I'm up to 9000 shares now with a 530% YTD return on my portfolio which includes STP, SPWR and has included FXI, CCJ, and ZOLT in the past. I went long partly due to technical reasons because it closed at an all time high the day before earnings. Anyway, are you still short? Quit being so stubborn and cover your position!

2007 Dec 04 12:49 AM