The Short Case For First Solar: Just Compare It To Its Peers

Cadmium telluride based solar panel maker First Solar (FSLR) is up 212.0% since it IPO’d in November. The company reported blow out fourth quarter numbers in February and has shown no signs of slowing down since then. Analysts and Jim Cramer love the stock. The use of Cadmium telluride instead of Polysilicon also makes the company more attractive when compared to a whole bunch of polysilicon based solar panel makers. I have been burned before shorting First Solar but I think now is the right time to short this stock.

Let’s look at why First Solar is a short here:

• Since the company IPO’d in mid November 2006 its six month lockout period will end in mid May 2007. Let’s look at how two of the recent Solar IPO’s performed right after their lockout period ended:

o Sunpower Corp. (SPWR)

o Suntech Power (STP)

Comparison to Peers:

• First Solar is now the second largest US listed pure play solar company by market cap right behind Suntech Power.

• It still needs to get rid of the excess Jim Cramer fat.

• There is still no definite answer if the polysilicon supply is easing up going into 2008, however, some of the recent news suggests it is after all easing up.

It will be interesting to see what happens with First Solar the next few weeks going into the month of May.

Full Disclosure: I am long STP and short FSLR

FSLR 1-yr chart: