First Solar Will Soar On New Photovoltaic Project, Partnerships

Apr.17.12 | About: First Solar, (FSLR)

I live in a new building that operates completely from solar panels. My electric bill is a fraction of what I use to pay. Yes, it was a big investment for the building owner. However, the payoff in customer satisfaction and a positive environmental impact is a huge return.

Solar energy is a hot topic, but the stocks are not looking so hot. First Solar (FSLR) is down around -84% over last year, and EPS remains negative. However, I agree with some analysts that this stock is looking at a turnaround future.

Solar power is beginning to catch on. In many cities, the solar power supply is creating a glut of solar energy. This is true in Pennsylvania (according to above linked article). In 2009, residential and small business owners tapped into a variety of incentive programs provided at the state and federal levels. This created a huge demand for solar panel arrays. At the time, there were only 300 solar systems in Pennsylvania. With the rebate program, the system grew to over 6,000.

While the demand shot up in 2009, this type of energy is sustainable, needing very little new work once it is up and running. This is great for the environment, as well as for the customers who no longer have high utility bills every month, but the solar industry forgot to account for the slow down after the initial roll out.

The fact that oil and gas companies continue to flirt with solar energy says that it is still a viable alternative. Tenaska, a privately held Nebraska company, has contracted with First Solar to build and operate new solar energy projects supplying power to users in San Diego.

Exelon (EXC) is also collaborating with First Solar on a solar photovoltaic endeavor in Southern California. The project receives funds from a guaranteed government loan and is one of the world's largest productions of its kind in solar power. If these types of companies are investing in the solar industry, there is reason to believe that the solar slump will give way to growth and the staggering drops in stock prices will bounce back.

Other solar energy stocks are also looking for fertile ground. GT Advanced Technologies (GTAT) has the right foot in solar and the left in LED developments. Both technologies will cut costs for consumers down the road.

SunPower (SPWR) uses a referral program that gives $200 to both the referrer and the referred. The company is utilizing the power of modern marketing by tapping into social networking. SunPower is starting commercial production of energy cells that have a conversion rate of 24%, the highest in the industry. Once these become available, more consumers will gravitate to the solar energy solution. This could be just the kick First Solar needs to attract additional investors.

Management is strong at First Solar, and it has what it will take to keep the company afloat while the consumer market catches up. Reaching into new markets is a good growth strategy. The real foundation and money will come from maintenance, joint collaborating endeavors like First Solar is instituting and establishing strong community connections in the areas it has operations.

First Solar is making smart investments in community relationships. In Malaysia, the company is involved in education programs that build up schools in its areas of operation. This can only build First Solar's reputation as a responsible corporate citizen within Malaysia and on a global scale.

First Solar's Corporate Charitable Fund emphasizes "green" education initiatives, access to clean energy and water in underserved areas and furthering the development of innovative and sustainable technologies.

Reaching into a new market, First Solar is partnering with Verve Energy and GE (GE) in Australia's largest solar photovoltaic power construction project. Australia is a key growth market for renewable energy.

First Solar is facing some possible litigation as class action suits are pending against the company for failure of fiduciary responsibility. The investigation relates to allegations in a shareholder class action suit, filed March 15, 2012, in the United States District Court for the District of Arizona. The shareholder lawsuit alleges that during the period between April 30, 2008 and February 28, 2012 First Solar misrepresented or failed to disclose the full impact of certain solar-module manufacturing flaws on its financial performance and that it improperly recognized revenue concerning other products in its systems business.

Despite its current legal challenges and current stock performance, twenty-seven of 39 analysts who cover First Solar still rate it as a hold. In addition, six analysts gave the stock a buy rating. The stock hit a 52-week low of around $20 versus the stock's 52 week high of over $148 a year ago. Argus Research analyst Jim Kelleher points out that investors tend to buy shares of First Solar on dips. First Solar is one of the few solar companies with a strong pipeline of utility projects making this a good time to buy up shares.

Last week, as the S&P 500 flowed into the red, First Solar stood out as one of the best performers in the index. In addition to the projects already discussed, First Solar is set to build a 20 megawatt solar power project in Maryland selling electricity and renewable energy credits to First Energy (FEN).

Wal-Mart (WMT) is First Solar's largest investor. Recently Wal-Mart has taken a larger oversight with the nomination of CFO Richard Chapman for a seat on the First Solar Board. The Waltons own more than 112 million shares of First Solar. The company is actively looking for "fresh blood" to drive its turnaround.

As the sun sets, it may look like thunder clouds are looming on this solar energy company. One thing about the sun, the rays even come through the cloud cover infusing energy into those roof top solar panels. I would not give up on First Solar yet. There is always tomorrow's sunrise.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.