Despite the incredulous valuation First Solar (FSLR) continues to do enough
to make shareholders happy. Let me be the first to say, despite my
early entry into solar (about 1.5 years ago), I've constantly
underestimated this specific name, and missed the boat - we've held it
in the fund briefly, but since I'm not a "growth at all costs" guy, but
a "growth at reasonable cost" guy, I've had a hard time holding this
(similar to Baidu.com (BIDU) where there is no reasonable metric of valuation which explains the stock price.)
My worry with First Solar
is simply an expectations game - they are reaching the stage that
within a quarter or two they will finally be hitting the wall in terms
of "yes we are growing at an incredible rate" BUT "investors expected
us to grow even more".... when that quarter happens, the momentum guys
will flee en masse
and you'll see a large drop off in the stock price. I thought this
quarter might be that quarter, since the CEO indicated in the past that in the
1st half 2008 there would be more flattish growth....but not yet.
However, sequential growth (that is, one quarter out) might be "modest" per the CEO's comments; and this stock is not priced for modest sequential growth. You can start reading between the lines in their guidance regarding this situation - while they keep raising future guidance it's not nearly the pace of "surprise" as in the past. So I still see this as a potential risk, not from a company execution standpoint but a stock standpoint.
- First Solar Inc (FSLR) raised its full-year 2008 revenue forecast to between $975 million and $1.05 billion from its previous estimate of $900 million to $950 million, Chief Financial Officer Jens Meyerhoff told a conference call on Wednesday.
- The company, which makes thin-film solar products, raised its expected production forecast to between 420 and 460 megawatts of solar modules from its forecast issued in February of 400 to 430 megawatts
- Meyerhoff told the conference call the company expects its second-quarter revenues to rise "modestly" from the first quarter level.
In 2009, analysts have the company growing to $5.12 EPS - I'll say the analysts are wrong and FSLR can do $7.... that means the stock is now trading at 43x estimates almost 2 years out. The "law of large numbers" will eventually hit First Solar as it has hit all great growth companies, even Mr Google (GOOG)... once you get to a certain size you cannot just keep doubling revenue every year. I think that is going to be the issue for First Solar between 2009 and 2010; growth should drop to a still excellent 40-60% range - but you are paying a much higher multiple for those earnings.
Further, all its brethren on the polysilicon side who have been hampered by sky high costs are going to see relief by that point (2009-2010) and their costs are going to fall through the floor - so the competitive atmosphere will be very different than it is now in my opinion. But that is neither here or there for now; it continues to execute and one cannot have any qualms with the scintillating growth - it's just a matter of what price do you pay for that growth? And how much more upside can we squeeze out from here? This is always our question on every stock - what is the upside potential versus downside risk - I believe risk is beginning to become more of a factor as upside surprises are becoming harder to reach (simply due to law of large numbers). Again, let me reiterate - execution has been flawless.
- First Solar Inc. said Wednesday that first-quarter earnings spiked, beating Wall Street expectations, as the solar module maker's revenue more than doubled.
- For the first quarter ended March 29, earnings surged to $46.6 million, or 57 cents per share, from $5 million, or 7 cents per share, in the prior year. Quarterly revenue more than doubled to $196.9 million, from $66.9 million in the first quarter of fiscal 2007.
- Analysts surveyed by Thomson Financial forecast first-quarter earnings of 47 cents per share on revenue of $183.6 million.
- Operating expenses jumped 83 percent to $46.2 million as selling, general and administrative expenses more than doubled.
- The company's foreign sales benefited from the weaker U.S. dollar.
This article has 26 comments:
ier
For more information, visit REFFWallStreet.com.
Brave Dave
Cents
OK, back to $3.40-$4.20. Let's alao give the company a generous 40 PE in 2009. What would that imply for today's stock price? At $3.40, a forward PE of 40 implies today's price of $136 and for $4.20 it sugegsts "fair value" of $168. Both are huge drops from $263.
But who buys at the targeted fair value? I don;t. I expect 25-40% gains from individual stocks I buy, the higher the risk the higher the expected return. At "conservative&quo... 20% growth in EPS of $3.40, that means a buy range of $91-$109.
At the more generous 50% growth in EPS of $4.20, that means a buy range of $120-$134.
Both are leagues below the today's closing price of $263, a price that unbelievably some people are considering a good entry point for a long term investment.
Yikes, is it any wonder that we have a housing crisis. Since when does buy high and leave low become the national motto?
Do yourself a favor, SELL FSLR. SELL IT! Currently, there are much better plays in solar, like LDK and SUNV. Or if you can wait, be smart and go with GE and AMAT's exposure.
Also consider thin-film solar has a lot of weakness, things like
* Short life, faster degrade performance
* Low efficient covert rate
* Natural of poisonous CdTe material used by FSLR thin film
After 3-5 years FSLR will face a lot of warranty issue/complaint from users.
The BEST thing now FSLR can do is use the opportunity that wall street has given, high stock price to acquire low valuation Solar companies, espeicially like silicon solar based companies, such as LDK and etc. This way can make their revenue/profit growth looks much better, also can make their PE/PS closer to reasonable.
Otherwise, itself will go from current price to $230, $180, $150, and eventually even lower.
FSLR has the word DISASTER written all over its own face. Do me a favor, go to their web site search for the job openings, with keyword tellurium. And tell me what you find and what you think about it. I am seeing a cliff ahead and folks are marching forward without hesitation.
I see you go broke soon, unless you wake up and get out before it is too late. I am heavily into PAL and SWC, I wish I can now put at least half of my resource into shorting FSLR, and soon. This is one stock that one can short from $300 a share down to $3 a share, and make a 10000% profit doing so!!!
You don't know that one can short a stock and make more than 100%? Not only it's possible to short and make more than 100%. It is possible to short FSLR from $300 down to $3, and make a 1000000% return on initial investment. That is 10000 fold, or turning $10K into $100M.
Here is how it works, maintain your margin at 50%. That means for each 1% drop of FSLR, you increase your short by 2%. On any rebounce you just reverse it and decrease your short position by 2% on any 1% rebounce of FSLR.
Since it takes 460 drops of 1% each for FSLR to drop 100 times from $300 to $3, you have 460 opportunities each to increase your short and increase your portfolio 2% each time. If you increase a number by 2%, and do it for 460 times, you end up with a number 9900 times bigger than where it started.
The only scenary this will not work, is if FSLR does not drop gradually. Like if I short 100 shares at $300 and the next day FSLR already collapsed to $3, allowing me no opportunity to add short, then the profit is limited to 100%.
50% margin is not fully margined. As I say, mathematically as long as you maintain a 50% margin, no more and no less, you will end up making 1000000%, not 10000%, riding FSLR from $300 down to $3. There is volatility. But it is not shaking out my short position. Any short position I was forced to cover in order to maintain a 50% margin, can be promptly re-shorted on the way down again.
I currently do not own any FSLR short yet, since I am heavily invested in PAL and SWC. But I will start to implement my short strategy in FSLR soon, when it reaches $300 again. I will start small and keep adding short on the way down.
I am short 400 shares at 293.xx
I for one will probably never use solar panels. I live in the NE and we don't get much sun. Furthermore I will not and do not have the time to clean the solar panels. I also will not put a product in or on my house that will possibly leak a toxic substance.
The big players will control this sector anyways, in the end. XOM and COP will not allow some company like FSLR to take away their customer base. When solar is finally widely accepted and cheap the big players will run the show. At this time I do not know of one person, not one that has a solar panel on their home, yes I know FSLR doesn't make home systems. Doesn't matter what I am getting at is solar is not accepted yet and it's going to be a long time before it is. I have quized a group of people from 18-84 and not one of them thinks solar is widely accepted ao a good idea.
Like a quote I read it's like broccoli ice cream. Ice cream is good but not in broccoli flavor. Solar is good but not with toxins. The US will not allow toxic solar panels to be used inside the us.