First Solar, SunPower: Threatened by Applied Materials Advances?

Is serious competition coming to solar panel darlings First Solar (FSLR) and SunPower (SPWR)? The two’s shares traded down today after a note from Friedman, Billings, Ramsey analyst Mehdi Hosseini stated that a customer of equipment maker Applied Materials (AMAT) was able to build a panel factory in three months’ time using Applied’s tools, according to the Associated Press, signalling that Applied could boost supply in the market, which could conceivably spell sharper competition for First Solar and SunPower. (As an astute reader pointed out, Hosseini last week downgraded First Solar on margin concerns.)

In a conversation I had with American Technology Research analyst John Hardy this evening, Hardy, who follows First Solar and SunPower, acknowledged that both stocks were responding to the Applied news, but says he sees no imminent threat.

“Applied’s customers are attempting to make a similar thin film solution to First Solar’s that is applicable to the same end market,” he noted, “But First Solar is producing higher efficiencies than Applied on an R&D basis.” By which he means First Solar’s conversion rate is 10.5%, versus the “mid to high single digits” for the technology that Applied enables, he says. It’s hard to know how to gauge the success of Applied’s customers, furthermore, before they start producing finished product, said Hardy.

Hardy went on, “First Solar has a pretty strong lead at this point. I don’t think in the near to medium term there should be any impact to First Solar’s fundamentals,” from Applied’s advances, he said. Ditto for SunPower. Hardy has “Buy” ratings on both stocks, and his 12-month price targets are $450 for First Solar, $164 for SunPower.

Shares of First Solar fell 5% to $265 today, and were up a fraction of a percent in after-hours trading. SunPower stock fell 3% to $82.52 and continued to decline fractionally in after hours. Applied Materials stock rose 3.4% to $19.56 today, and the shares continued to rise fractionally after the bell.

Comments

[mjg1231:]

from what I've read FSLR cost per watt is somewhere around $1.3 v. a theoretical $1.5 for the SunFab. One thing I have learned in the semiconductor equipment industry is to never bet against AMAT and I am not about to do so with their move into solar.

2008 May 28 02:02 AM

[fxtrader07:]

analysts who guesstimate that FSLRs margins will stay high or even expand and do so for 3 or more years out waste their time and mislead people. Not intentionally so, granted, but still they do. This industry is changing so fast and rapidly that these predictions sre simply useless. Other competitotrs, other technologies, changing fundamentals of existing competing technologies (polysilicon, for instance), changing government subsidies etc. etc. all can and will have huge impacts.
Given that a stock like FSLR is priced for perfection and then some for the next 5-6 years out, those targets of 450$ or higher are nonsense and garbage. They are as good a guess as seeing a $80 target.
people who buy stocks like fslr at 250 or 300$/share based on such nonsense do nothing but gamble - they do certainly not invest, no matter what they pretend.

2008 May 28 04:19 AM

[sanbt:]

Few Questions: just for better clarity

Is AMAT only player in both c-Si & Thin Film tech- pls someone clarify?Is AMAT threat to both c-Si & TF competitors?

Who got the Abu Dhabi project for 210 mw? Is it AMAT & FSLR? or is it both?

Who has the money power(Cash) to execute gigawatt projects AMAT or FSLR?

Who has R&D & Engineering strength to continuously bring the cost per watt down YoY?

2008 Jun 03 10:53 AM