There has been a lot of news for First Solar (FSLR) this month, and these have had mostly negative effects on my perception of the stock. Axiom Capital analyst Gordon Johnson recently claimed that First Solar's solar energy installation projects in the U.S. could be at a much greater risk than people had initially believed. This is because the regulators have requested that First Solar replace panels at the U.S. sites.
A number of negative ripple effects can already be seen. For example, the company's "AV Solar Ranch 1" is behind schedule because it has been unable to obtain the necessary approvals. As things stand, about half of the staff on that project has been furloughed. At this point, it is still unclear whether or not other First Solar projects will be affected. Although there is not a lot of news about this topic, stockholders should certainly keep their eyes and ears open, as it will have a huge effect on the stock.
Meanwhile, First Solar and Ecotality (ECTY) are disputing a Romney campaign ad that attempts to draw parallels between the money Solyndra received and the money that went to First Solar and Ecotality. Solyndra filed for Chapter 11 bankruptcy following a $535 million loan that the government gave it. As I am sure you realize, the comparison does not depict First Solar or Ecotality in a very favorable light. It gives the impression that First Solar and Ecotality are also companies that will waste government money and then file for bankruptcy. Consequently, they are far from pleased with the advertisement.
This is something that can have a fairly negative effect on the stock. If the general public sees the company in this light, it may be less inclined to invest in the company. In addition, the ad gives an inaccurate representation of the funds given to First Solar and Ecotality. For example, it contains a chart that shows First Solar's stock as being at an "all time low" of $4, despite the fact that the stock has never reached that margin. The ad also depicts companies such as Solyndra and First Solar as being part of a "string of Energy Department green energy initiatives that wiped out jobs and lost money while steering taxpayer dollars to President Barack Obama's cronies." This seems to be one of the key arguments being used in Romney's campaign. In addition, the ad claims that First Solar received $3 billion in tax-payer backed loan guarantees, but is now at an all-time low and cutting jobs. The truth of the matter is more complex, and a close examination will show that the company did a fairly good job at cutting its losses and hanging in there.
This is something that could cause investors to panic. We have to acknowledge that not everyone keeps close tabs on their stock portfolio - even though they should - and an ad like this one could cause significant investor panic. At this point, however, Romney's campaign has not provided either an explanation or an apology for this false information and blatant conjecture.
If we take a look at some of First Solar's competitors, we can see that things are not going so well for them either.
One of the company's main competitors, Suntech Power (STP), managed to lose money in its first quarter of the year. This is due to the fact that shipments decreased and that the prices of its solar panels fell significantly. This is something that is affecting most players in the industry though. There has been a ramp in demand in China and a huge decline in Europe, where sales of solar panels are the highest. This led to an oversupply of solar panels that had a large and negative effect on the price of those panels. It is likely that investors will have to wait for a short while to see prices improve, so I believe this stock will continue to struggle for a while.
SunPower (SPWR) is encountering a much different kind of problem. Its 110MW US project has recently begun receiving much criticism from environmentalists. The company believes the project will bring a lot of revenue into the country, and it appears that many jobs will be created by the project. Protestors, however, are concerned about two key factors. First, the construction may interfere with the pathways used by kit foxes living in the area. Second, the project may interfere with the viability of future farming on the land. These complaints are occurring despite claims by the company that it will put measures in place to allow the kit foxes to continue living in peace in the area. While the company will benefit from this project if it is successful, the protests against it will likely have a temporarily negative effect on the stock until everything stabilizes.
Unlike its competitors, JA Solar (JASO) has some good news for its stockholders, as it claims that "its shipments of solar photovoltaic (PV) cells and modules intended for the United States market will be mostly unaffected by pending U.S. tariffs." Personally, I feel that the tariffs the government wishes to impose are contrary to the global endeavor to move towards alternative sources of energy, as these tariffs could have a serious effect on the growth of the solar market. Consequently, this is something that I feel will affect JA, as well as the other major players in the solar power industry. One would think that the government would want to work with solar power companies, not against them. JA has confidence in its ability to deal with the tariffs, however, and I think this will reassure stockholders and help the company maintain a consistent price in the stock market, at least for now.
Energy companies are struggling in a variety of ways at the moment, and First Solar is no exception to this. I believe its stock price is going to be falling as more people react to the advertisement from Romney's campaign. The struggles with its solar energy installation projects are not helping either. Its competitors are not doing much better at the moment, furthermore, making me believe this is not a good time to invest in energy companies. If the trial related to the advertisement leads to a favorable outcome, First Solar stock may improve over time. For the time being, however, I would not recommend investing in this company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.