Seeking Alpha

Jack Yetiv

 
View as an RSS Feed
View Jack Yetiv's Comments BY TICKER:
Latest  |  Highest rated
  • Geothermal Companies Receive Cost Sharing Grants [View article]
    In discussing these above companies, I think a major point needs to be made regarding NGLPF. Although it's great that NGLPF received about $3.5 million on Fri, a much more significant development occurred on Oct. 9--NGLPF made a $58 million application for a payment of the 30% investment tax credit. According to the press release (and to the Treasury's rules), the npayment should be forthcoming in early December since the Blue Mountain geothermal plant against which this credit has been sought has hit thye necessary benchmarks to receive this payment.

    I am absolutely flabbergasted the after receiving both the $3.5 million grant and expecting the $58 million credit payment in about 30 days, is not trading at closer to $1.50 than under a dollar.

    Jack Yetiv

    Disclosure: Long over 100K shares of NGLPF with a cost basis of about 90 cents and RZ.
    Nov 1 10:32 PM | Likes Like |Link to Comment
  • Solar Stocks Break Down Yet Again [View article]
    HERE IS A COMMENT I WROTE IN RESPONSE TO ANOTHER SOLAR ARTICLE ON SA ON SEPT. 23, 2009, in which the author argued that FSLR was worth $150+ and that TSL (a company which I like a lot but which is probably fairly priced in the $30-$35 range) is worth more than $35:

    First, I think your metric of cost/watt of panel is the WRONG metric to use. The correct metric is cost per INSTALLED watt. Since you have to install almost twice as many FSLR panels to equal the output of a silicon panel, your land cost is going to be substantially higher, as will be balance of system costs such as racking, wire, labor, etc. When you look at cost per INSTALLED watt, the cost delta between thin-panel and silicon-based panels is much narrower.

    In addition, we KNOW that silicon-based panels will produce power for 30 (and more) years--because we have panels of that age out there. We do not have any 30-year-old thin-film panels out there so their longevity is more of a question in my mind.

    Also, the rooftop market is almost off-limits to thin-film panels because such panels require almost twice as much roof space.

    Given the foregoing opinions which I hold, I disagree that FSLR is good value at $150/share. I do not doubt that FSLR sales will grow significantly in the next few years because overall solar panel sales are going to increase trememdously.

    But I will bet you that by the end of this year--if not sooner--FSLR's 50%+ margins will be history, and I will also bet that its margins will be in the 30's in 2010. If margins are cut in half, FSLR can double sales and yet not make any more profit. That outcome does not justify a PE of approx 20, which is where FSLR is right now.

    As to TSL, I like it a lot (see my articles on TSL last year, before others began touting it), but am concerned about buying it at $35. Although there is upside potential, I think downside risk is significant as well.

    I THINK THE ABOVE COMMENT STILL APPLIES. Obviously, the market now agrees with me that FSLR was overpriced at $150. We'll see what happens with TSL after earnings. As much as I like the solar industry and the potential it has to solve a lot of our problems, it has largely become a commodity business and I believe 15-25% gross margins and 10-15% operating margins will be standard fare in this business going forward.

    Jack Yetiv

    Jack Yetiv
    Oct 31 07:01 PM | 1 Like Like |Link to Comment
  • Is There an Opportunity in First Solar? [View article]
    I think the market sold off not only because of the revenue miss but also because gross margins had dropped from 56% in Q2 to 50% this quarter--and guidance for the 4th quarter was 41-44%. I suspect that the market concluded that this is not a gross margin trajectory that justifies a valuation of 17X this year's earnings--and I agree. I have posted about FSLR in SA for the past couple of years and have had this opinion previously--and the gross margin drop this quarter with guidance for additional drop simply confirms it.

    I believe FSLR will increase sales another 20-30% next year over this year, but their earnings will not increase much because their gross and operating margins will be further compressed next year due to continued (though more muted) ASP declines.

    Jack Yetiv
    Oct 29 09:57 PM | 2 Likes Like |Link to Comment
  • Raser Technologies: Financing, Dilution Continue to Be an Issue for Now [View article]
    Keep in mind that the hybrid powertrain that RZ has showcased in the Hummer could be used, with slight modification, in most SUV's and trucks. That covers almost 50% of the automative market in the US.

    Also, as I mentioned in my previous comment, it seems quite likely to me that RZ will be able to apply for the 30% tax credit on its Thermo plant in the next few months, and possibly even before this year is out.

    Given the potential of the hybdrid powertrain and the better than 50:50 likelihood that RZ will get a tax credit on Thermo, I think there is more upside potential to downside potential on RZ.

    Jack Yetiv
    Oct 28 09:43 PM | 2 Likes Like |Link to Comment
  • Raser Technologies: Financing, Dilution Continue to Be an Issue for Now [View article]
    I agree with both the article and the comment, with one potential significant disagreement with the author. He suggests that financing is a big issue. On that we agree. Where we disagree is that he considers financing to be very risky, and I do not believe that to be so (I do realize the market disagrees with me, given that NGLPF has dropped 25% in the past few trading days and RZ has dropped 40% in the past couple of months).

    The reason I do not see funding to be as major of a doubt as the author is because of the currently-available 30% investment tax credit. To see how it works, check out the NGLPF press release about 2 weeks ago. NGLPF has applied for a $58 million tax credit against their recently constructed Blue Mountain geo plant. As I understand it, if the certifications have been completed (and NGLPF completed those before applying) and the paperwork is submitted correctly, these credits are paid within 60 days, which in NGLPF's case will be in early December (they submitted the app Oct 9).

    Wouldn't most people consider the very-likely influx of a $58 million GRANT (not a loan) in less than 45 days from today to be meaningful financing for a company with a market cap under $100 million?

    Although the above comment addresses NGLPF, I believe RZ is working on a similar application for its Thermo plant. Keep in mind that this program is not limited to one plant--in fact, it can be repeated as each plant achieves the necessary milestones

    Jack Yetiv
    Oct 28 11:13 AM | 3 Likes Like |Link to Comment
  • SunPower Gives Optimistic Outlook for 2010, Plans to Launch Gen 3 Cell [View article]
    As I have opined on these pages several times recently, I believe the solar business is going to be a relatively low-margin business in 2009 and beyond. SPWRA's conf call simply confirms this impression.

    I think the fourth quarter may still show some decent margins because of cost-cutting and because I believe ASP reductions will slow down because demand will exceed supply--primarily because panel-fab-building slowed down significantly in late '08 and the first half of '09, but I believe by next year, ASP's will drop again as production increases to meet demand.

    Of course, as prices go down, that will further boost demand, which will arrest pricipitous falls in prices (and hence, margins), but once equilibrium is reached, I believe gross margins of good companies (like SunPower) will be in the 20% range--as they were this quarter (FSLR will have higher margins than the 20's because of its cost advantages, but its margins are going to be compressed as well, rpobably down from the 50's last quarter to the 30s by the end of next year).

    I do believe that SPWRA can increase sales by 20-30% next year, but that is not going to yield such a high EPS that it justifies a forward PE against 2010 income in excess of 20.

    Jack Yetiv

    DISCLOSURE: No position in any solar stock, neither short nor long.
    Oct 23 12:36 PM | 1 Like Like |Link to Comment
  • The Sweet Smell of Solar Values [View article]
    First, thanks for introducing Systaic--I'm not familiar with it and will need to look into it.

    Second, I have some disagreements with your conclusions. I have liked TSL since early 2008, as you can see from SA articles I wrote recommending it. In fact, I still like (for the same reasons I expressed in 2008) TSL's integrated business model and the geographic dispersion of its customers, and its forward-thinking lack of reliance on the European market. Having said all that, a forward PE of 13.5 against 2010 projected earnings is not a screaming bargain. Depending on market sentiment for solars, this could be fairly priced, somewhat underpriced (ie, suggesting some upside) or somewhat overpriced (ie, suggesting some downside risk).

    Where TSL's stock price goes largely depends, in my opinion, on where ASP's end up in the second half of 2009 and in 2010.

    I can make very compelling arguments that ASP's in 2009 and 2010 (1) will fall from where they were in Q2, (2) will go up from where they were in Q2, (3) will stay stable from where they were in Q2.

    The problem is--I'm not sure which one of my compelling arguments is most likely to be correct. My GUESS is that ASP's will continue to drop, but not as much as some of the doomsayers think they will, and I believe this will occur because demand will increase in late 2009 and 2010 more than many expect. But my confidence level in this prediction is not super-high, and a forward PE of 13.5 does not leave much room for error.

    Further thoughts later.

    Jack Yetiv
    Oct 10 11:18 AM | 1 Like Like |Link to Comment
  • Natural Gas, And Lots of It [View article]
    I've now been reading for months about how storage is going to fill up causing gas to be "dumped" on the market, but the math does not add up. Experts are projecting an injection of 50-60 BCF to be reported this Thurs, Oct. 1, which should put total amt of gas stored at 3.6 TCF. I have read we have somewhere between 3.8 and 4.0 TCF of storage capacity, with the best number, I believe, being the midpoint, 3.9 TCF. That means we can store 300 BCF more before storage is full (yes, I realize different storage locations may have differential fills, but I am talking across the US).

    If we continue storing an average of 55 BCF per week, on Oct. 29, we should be at about 3.8 TCF--just approaching full on the 3.8 TCF storage capacity number, and a bit under full if you believe the 3.9 TCF number, and even more under if you believe 4.0 TCF of storage capacity.

    Usually withdrawal from storage starts in the beginning of Nov. Therefore, unless I'm missing something, there won't be many days (if any) of "dumping" before withdrawal from storage begins.

    Jack Yetiv
    Sep 29 10:14 AM | 4 Likes Like |Link to Comment
  • Picking Solar Energy Winners [View article]
    First, I think your metric of cost/watt of panel is the WRONG metric to use. The correct metric is cost per INSTALLED watt. Since you have to install almost twice as many FSLR panels to equal the output of a silicon panel, your land cost is going to be substantially higher, as will be balance of system costs such as racking, wire, labor, etc. When you look at cost per INSTALLED watt, the cost delta between thin-panel and silicon-based panels is much narrower.

    In addition, we KNOW that silicon-based panels will produce power for 30 (and more) years--because we have panels of that age out there. We do not have any 30-year-old thin-film panels out there so their longevity is more of a question in my mind.

    Also, the rooftop market is almost off-limits to thin-film panels because such panels require almost twice as much roof space.

    Given the foregoing opinions which I hold, I disagree that FSLR is good value at $150/share. I do not doubt that FSLR sales will grow significantly in the next few years because overall solar panel sales are going to increase trememdously.

    But I will bet you that by the end of this year--if not sooner--FSLR's 50%+ margins will be history, and I will also bet that its margins will be in the 30's in 2010. If margins are cut in half, FSLR can double sales and yet not make any more profit. That outcome does not justify a PE of approx 20, which is where FSLR is right now.

    As to TSL, I like it a lot (see my articles on TSL last year, before others began touting it), but am concerned about buying it at $35. Although there is upside potential, I think downside risk is significant as well.

    Jack Yetiv
    Sep 23 10:18 AM | 6 Likes Like |Link to Comment
  • Trina Solar Takes Aim at First Solar [View article]
    I have long predicted (since last year) that the integrated Chinese panel-makers (eg, TSL) would challenge TOTAL INSTALLED COSTS using FSLR's panels within a couple of years because I previously opined that the poly-component of TSL's panels would decrease from last year's $1.75 per watt to under 75 cents per watt within two years.

    Well, the macroeconomic events of the past year have made my dropping-price-of-poly prediction come true far far sooner than I would have ever guessed. At $30 to $40/kg poly costs, the poly costs per watt are quite low (15 to 20 cents per watt), and probably not THAT different from the cadmium and tellurium in TWO FSLR panels (you need almost two FSLR panels to equal the output of one poly-based TSL panel).

    When you also add in the higher BOS (balance-of-system) costs (extra shipping, racking, wire, labor to connect twice as many panels) and land costs, total installed costs should not be very different between FSLR and TSL as long as TSL can get poly in the $30 to $40 range.

    My guess is that TSL's projections are not that aggressive. My guess is that TSL has contracted for $30 to $40/kg poly next year and keep in mind that TSL has been dropping non-poly panel-making costs quite aggressively (almost 20% in the past year).

    Having said that, I agree that TSL is not a strong buy by any means at $30/share because to me downside risk comes not from TSL's failure to meet the cost-reduction roadmap I have described above but rather, by its margins dropping (from the 27% range it recently reported) due to ASP's dropping more quickly than it is projecting.

    Of course, I believe FSLR is overpriced in the $130 range--just like I believed when FSLR was $300 last year. The reason for this is not due to lack of demand--FSLR will sell everything it can produce in the next year or two--but because I project that its gross margins, which have traditionally been in the 50's, will be half that by this time next year.

    Jack Yetiv
    Sep 13 10:13 AM | 7 Likes Like |Link to Comment
  • First Solar Set to Conquer China's Growing Market [View article]
    I would not make much of FSLR's "win," for several reasons (yes, I realize the market has disagreed with me so far, but that was also the case last year when FSLR was $300, and I opined its fair value was closer to $100):

    1) What was signed was a memorandum of understanding, not a binding contract. Costs and pricing have not been determined yet. The "devil," as they say, "is in the details."

    2) Even if this becomes a binding contract, first meaningful revenue to FSLR does not come for another 18 months or so. Further, I will bet FSLR's traditional 50%+ margins will be cut in half on this project--if not less.

    3) The bulk of the revenue from this deal is several years away. Lots can happen between now and then--not the least of which is that I believe that total installed costs of poly-based panels will be LESS than the installed cost of FSLR's thin-film panels LONG before the bulk of the revenue is recognized. This sets up a significant possibility that FSLR's margins will either become razor-thin on this project in 2011 or 2012--or it will lose the contract to one or more Chinese poly-based panel makers.

    Jack Yetiv
    Sep 10 01:49 PM | Likes Like |Link to Comment
  • First Solar Sell-Off Is Overdone [View article]
    I predict that by the beginning of next year, one or more of the integrated Chinese solar manufacturers (eg, TSL, SOL, and/or YGE) will have a cost per watt of panel (INCLUDING their silicon cost) that is within a few percent of FSLR's cost per watt of panel. After ADDING in the extra balance-of-system costs (in essence, after taking into account the fact that you need to build and install TWO FSLR panels to match the power output of ONE high-efficiency poly-based panel, a poly-based installation will actually be CHEAPER than a thin-film installation from FSLR.

    This means that FSLR's gross margins, which have traditionally been in the 50%+ range will DROP precipitously, exposing FSLR's stock to a real risk of going to $100 or below ($100 represents a forward PE of 10 to 12 against 2010 projected EPS).

    If poly drops below the current $40-60/kg price (and I believe it will), the poly portion of the cost of a panel becomes very small and almost irrelevant. For example, assuming a poly price of $40/kg and 5 gm/watt of poly, the poly cost per watt is 20 cents (this time last year, poly costs per watt were running about $1.75/watt!).

    Summary--I believe the upside on FSLR is limited, and downside is at least as likely as upside. I believe SOL and TSL are currently the best bets in the solar space with limited downside (unless the whole market crashes) and a decent prospect of 50% upside in the next 6-12 months. Both SOL and TSL are currently valued at a forward PE of about 10, and both will benefit from the fact that China is going at a breakneck speed to incentivize solar and from the fact that as their costs go down, poly-based Chinese manufacturers will grab more of the market share that FSLR would have had last year.

    Jack Yetiv
    Aug 27 10:58 AM | 7 Likes Like |Link to Comment
  • Bargain of the Week: First Solar [View article]
    I respectfully disagree with the author and quite a few of the commenters. With poly at $35/kg, and assuming 5 g of poly per watt, the poly cost in a panel is 17 cents/watt--an almost irrelevant cost, and probably equal to the Cd and Te that FSLR puts in its panels.

    So low-cost poly DOES essentially kill FSLR's "supposed" cost advantage. As an aside, Si is one of the most abundant elements on earth, and on a longterm basis, there is no reason for poly to cost $35/kg, especially as manufacturing processes to make poly become more efficient, given that the raw material to make it is pretty cheap.

    I use the term "supposed" for a reason. Assume that FSLR produces panels with 10% efficiency, and its competitors 20% (SPWRA produces 22% panels today, the Chinese fabs are at 18-19%). Even assuming FSLR's Cd/Te costs were lower than the poly costs, FSLR MUST BUILD TWO PANELS to generate the same amount of power as ONE doubly-efficient poly panel. The aluminum, glass, fabrication, etc cost of the second panel must also be taken into account. Also, if high-efficiency poly panels are put on trackers, FSLR's cost "advantage" becomes even more spurious.

    Finally, FSLR needs essentially twice as much real estate to generate the same amount of power as a field of poly-based panels (almost three times as much if the panels are put on trackers). That real estate does not come free--regardless of whether it is land in the Nevada desert or rooftops.

    Taking all of these factors into account, I believe that FSLR does NOT deserve a higher forward PE than the likes of TSL, CSIQ, STP and SPWRA.

    Jack Yetiv
    Aug 8 03:48 AM | 1 Like Like |Link to Comment
  • Is SunPower Downgrade Warranted? [View article]
    I agree with the downgrade, although I am not sure I could call a price target as precise as the analyst. On the other hand, I do not agree with the analyst's implication that FSLR deserves a forward PE (against 2010's EPS, not even 2009's) of 25.

    As to SPWRA, the fact that it can put out 22% panels versus just 18-19% by its competitors is not a big advantage. It's worth something, but that something will keep dropping as overall panel efficiencies of SPWRA's competitors reach and exceed 20%, and as panel prices continue to drop.

    As to FSLR, its cost advantage is fast eroding as poly-based panels are approacing total production cost of $1/watt and ASP's of $2/watt. Finally, because of a lack of truly meaningful differentiation, the solar business is fast becoming a commodity business, with gross margins of probably 15-20% to be reasonably expected in 2010 from the better-run companies.

    Therefore, I do not believe either SPWRA or FSLR deserve forward multiples in excess of 10-15.

    This is true despite the fact that I strongly believe PV sales will climb very rapidly from a relatively low base in 2008, as well they should, because many people are beginning to realize that if we take ALL costs into account (yes, including CO2), grid parity has been achieved.

    Jack Yetiv
    Aug 4 10:10 AM | 3 Likes Like |Link to Comment
  • As Expected, First Solar Disappoints [View article]
    Jimp,

    It has indeed been a long time. Bought a crime-ridden, horribly-run, 346-unit apt complex last summer and for that reason and othyers, have been extremely busy since then. I did not do much in the stock market in the past year except sell calls against my various stock positions, and some of those call finally got exercised (on TSL).

    It will probably be another month or two (or three) before I can re-educate myself so that I can write an intelligent article on the solar space.

    Jack
    Aug 3 09:30 AM | Likes Like |Link to Comment
COMMENTS STATS
449 Comments
45 Likes