Technology markets are nearly all boom-and-bust. The key to success lies in beating the bust.
After the dot-com bust of 2000 we saw a host of names fall by the wayside, but some, like Priceline (PCLN) and Amazon.com (AMZN), survived to make new highs. The same is bound to be true in the current solar bust. The question is whether First Solar (NASDAQ:FSLR) will be one of the survivors, or whether it will become the next Pets.com sock-puppet.
Plenty of folks are betting it's the latter. Short interest in the stock has ballooned and plenty of analysts are saying turn out the lights, claiming Chinese producers can beat it on price and crush it. Law firms are already rushing to court claiming investors were misled in its crash.
Where, then is the bullish case?
Management seems to have recognized that its problem lies in sell-through.
The company has hired a global energy sales expert, James Hughes, as chief commercial officer to spur global demand.
The company has shifted much of its production to Malaysia, where labor costs will not be a problem.
First Solar's problems are not unique to the company. All the solar stocks are in the toilet due to overproduction, which has cut prices and raised market expectations for still-lower costs down the road.
This is the way tech markets work. My question for First Solar does not concern its statements to the SEC concerning a project it eventually managed to sell. I don't think tariffs will save it. I'm not concerned about the politics.
I want to know two things.
First, can the company continue to sell its projects and meet claims of 15% annual returns?
Second, can it find or fund new breakthroughs that will let it sell more stuff? Changing the way panels are installed can multiply their efficiency, true, but I want to see it telling a new story, new materials or substantially different production techniques, before I call FSLR a buy again. Until then it remains a hold at best.
To that end, I respectfully disagree with Kraken, who says the company's decision to add new board members, rather than replace some of those it has, is a worrisome sign. Quite the contrary. It's acknowledgement the company understands its problems and is seeking help in crafting a new vision.
Despite all that has gone wrong at FSLR, the company has an established market franchise and a sustainable business model. It also recognizes its need to innovate and sell. Those who are writing the death knell of solar technology on the back of this company are going to be disappointed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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