Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
Flying Very Close to the Sun by Mark Veverka
Summary: Shares of First Solar Inc. (NASDAQ:FSLR) jumped over $20 to almost $120 on Monday after the company disclosed new contracts which it says are worth about $1.28 billion over the next five years. Analysts were tripping over themselves to upgrade the stock, based on such far-fetched metrics as EPS of $5.39 -- in 2012. The company's $8 billion-plus valuation on $400 million 2007e sales and EPS of $0.53 has it trading at 96x 2008e earnings and 14x sales. Investors are hyped about First Solar's thin-solar ('Solar 2.0') technology that uses chemicals instead of polysilicon to absorb sunlight, so that instead of being housed in thick rooftop panels, its cells can be incorporated into tiles -- turning roofs into solar panels. But Barron's says, "The dirty secret on First Solar is that it uses thin-solar technology, but the film is still applied to heavy glass" much like Solar 1.0 panels -- many of which are too heavy to even be mounted on rooftops. Its technology is indeed more cost-efficient than previous iterations, but it still falls short of realizing the hype of Solar 2.0. Also, the company relies heavily on European government subsidies, and two weeks ago Germany, a big player, said it wants to cut solar subsidies. Deutsche Bank alternative-energy analyst Steve O'Rourke says its shares are "stretched."