First Solar Spreads Some Sunshine

Another fantastic result from First Solar (FSLR)... they keep justifying their sky high valuation. This is one of the few names in the space not constrained by the polysilicon shortage and they've taken full advantage of it. We don't own this name anymore but I added a bit to Energy Conversion Devices (ENER today (also not affected by polysilicon prices) earlier in the day in anticipation. First Solar has yet to really disappoint in its public life, unlike its brethren, some of which make it a habit to do so. I won't name names to protect the innocent.

We'll see how the stock reacts, but on a cursory glance of fundamentals, everything looks quite juicy. Remember it's not the news, but the reaction to the news. Keep in mind analysts estimates $217M revenue, $0.58 EPS. Much like the fertilizers at some point you get so large the PERCENT increase cannot keep up with previous quarters, but the magnitude of the numbers are still impressive. If all I did was read earnings reports of stocks we own or follow in our sectors you'd think this market would be at Dow 20K!

They do have one of the shortest press releases out of any company I follow - short and sweet. Astounding 36% sequential revenue growth, and 247% year over year growth. For earnings the numbers were 49% sequential growth (wow) and some mind-numbing number that blew up my calculator when you do year over year (excluding tax benefit). Gross margins now up to 54% from last quarter's 53% - staggering in comparison to polysilicon-based peers. I keep thinking this stock is too expensive and "next quarter" will be the one where expectations get too high and it will fall flat. First Solar keeps telling me "No soup for you". Bravo.

Only fly in ointment is no guidance yet so everyone has to hold their breath to see what they say so the market lemmings can react violently one way or the other the minute it is uttered.

• First Solar, Inc.  today announced its financial results for the second quarter ended June 28, 2008. Quarterly revenues were $267.0 million, up from $196.9 million in the first quarter of fiscal 2008 and up from $77.2 million in the second quarter of fiscal 2007
• Net income for the second quarter of fiscal 2008 was $69.7 million or $0.85 per share on a fully diluted basis, compared to net income of $46.6 million or $0.57 per share on a fully diluted basis for the first quarter of fiscal 2008. Net income for the second quarter of fiscal 2007 was $44.4 million or $0.58 per share on a fully diluted basis, which included a one-time income tax benefit of $39.2 million that resulted from the reversal of valuation allowances against previously established U.S. deferred income tax assets.

Classic double bottom formation - why didn't my on-staff technician notify me? Wait, I am the on-staff technician. Bah.

Disclosure: No position.

Comments

[G23ROCKS:]

"First Solar has yet to really disappoint in its public life, unlike its brethren, some of which make it a habit to do so. I won't name names to protect the innocent."

Um... TSL? ;)

2008 Jul 30 06:51 PM

[solar jim:]

Um... most all the China based players?

2008 Jul 30 07:22 PM

[solar jim:]

solar is not very labor intensive so China doesn't have this huge leg up like they do with toys and other heavy labor oriented type industries (toys/garments/etc). With solar its execution, not who pays the least labor that wins. FSLR has been flawless since IPO'ing last year. I expect more of the same.

2008 Jul 30 07:24 PM

[DAD08:]

Growth rates determine stock prices as well as market sentiment...not P/E's...Those who wathc P/E's all the time will always be looking up at the leaders who they think are overvalued...
Thin film seems to be the way to play the solars...like you- I also picked up some ENER today- Calls.
Best of Luck going forward.

2008 Jul 30 07:33 PM

[mr clark:]

I think FSLR would be a great buy on this report... if its mkt cap were $6-8billion... so now we have, at this rate, annual net income approaching $300million... in 10 years thats $3billion... or at after hours price of $300+, it would take 80 YEARS to make their current mkt cap!!!

what are people smoking out there, tellurium-laced stogies???

2008 Jul 30 10:29 PM

[akapital:]

Good article but if you feel late to these alt energy stocks and you missed FSLR...and you missed ENER...it's not too late to consider SATC. There are many other undiscovered quality companies in this sector that are experiencing incredible growth...SATC makes inverters and regardless of how the solar panel is made they are going to need inverters

2008 Jul 30 11:36 PM

[Jase:]

akapital: late to the party? Sorry mate, Canadian Solar (CSIQ) is the star of the bunch and has its best days yet to come. It's y.o.y. EPS growth is over 600%, target price by the end of the year is over $100/share. That's over 300% growth from current levels; even so, at that level it would still be trading as *half* of FSLR's current P/E. CSIQ will blow away earnings again next month, after their smart investments (in themselves) last November they are now firing on all cylinders.

2008 Jul 31 12:24 AM

[supershort:]

think FSLR would be a great buy on this report... if its mkt cap were $6-8billion... so now we have, at this rate, annual net income approaching $300million... in 10 years thats $3billion... or at after hours price of $300+, it would take 80 YEARS to make their current mkt cap!!!

what are people smoking out there, tellurium-laced stogies???

This is the best comment I have read so far on SA.
The funny thing is that SPWR which uses poly has been up in sympathy with FSLR. A whole lot of tellurium-laced stogies being smoked indeed.

2008 Jul 31 02:38 AM

[Piggybank:]

I can agree with the PE sentiment though as European investor.

Tell me why i should invest in SPWR with it's absurd valuation if i could just as well invest in REC. Both company's are comparable in size and quality of product but REC has atleast a decent profit margin on their sizable revenue and has a far lower market cap than SPWR. And then consider that subsidy's and economical sitatuition create more uncertainty over US solar stocks than European ones for ex. IMo valuations for SPWR and FSLR imo either reflect some chauvinism or speculation in the USA is just that more extreme. I'd go for the latter.

2008 Jul 31 08:26 AM

[NOWHEREMAN:]

so much for the hype on FSLR, up 20 in after hours trade made Its bullish groupies predict up another 30 on top of that. Good thing it made money, otherwise it would have been down.

What the market giveth, the market Taketh away.

2008 Jul 31 04:43 PM

[Breadnight:]

I'm waiting on this one to break-down. I agree with Mr Clark on this one, and once it does break down.. .watch out below.

Tell me please how solar is better than wind turbines?? I think both are flawed. The real winner in China is coal. They are building approx 1 coal fired power plant per day!! In the next 3 years they will have added the coal fired capacity that exists today in the US -in 5 years time.

The demand for power generation is so great, that peak load producers like wind and solar are out of the question.

Alternative Energy's only hope is that politicians will do anything for a vote -and current popular belief in global warming will keep these in play.

2008 Aug 03 10:06 AM