(click chart for higher resolution)
One great fundamental bull case for First Solar is outlined in this report by morningstar, just to quote a few lines:
"We expect an industry rebound will not occur until mid-2012 at the earliest. Solar demand growth remains promising in the long term, but near-term growth rates are going to be very modest...
First Solar is the only solar company whose shares have a clear near-term catalyst: its pipeline of utility-scale projects in North America. We project this business segment to constitute more than 70% of the firm's revenue and 35%-40% of production output in 2012, while also serving as the overwhelming source of near-term earnings beginning in the third quarter of 2011.
Pricing on First Solar's 2011-13 backlog of utility-scale projects was set before the industry downturn, and none are subject to renegotiation. These projects were priced using First Solar's 2008-09 project installation cost levels, which were 35%-40% higher than they are today. Also adding to the bottom line will be the reduction in costs of capital for the 1,070 megawatts' worth of projects that received Department of Energy loan guarantees, which allow the company to realize higher selling prices. Putting it all together, this book of business isn't just going to provide an earnings buffer, but will in fact mint the company a great deal of money...
The big risk to First Solar's longer-term story is what will happen to the company's profitability and returns when these lucrative projects are completed in 2013. Any new utility-scale deals will be signed at lower prices. Without another large reduction in costs, the company could encounter some major headwinds. But we don't think this risk will be influencing the stock for quite a while, as 2014 is a lifetime away in the solar sector."
To the best of my knowledge, First Solar presents the greatest long term (5-10 yrs) investment opportunity in the market today. Despite this, an obviously bearish descending triangle has formed in the daily chart appearing as a continuation to the long term downtrend. Unfortunately, with the broader market in bear mode, solar will continue to struggle despite soaring energy prices.
Is FSLR trying to fill the 2007 gap to $35?
Disclosure: I am long FSLR stock and calls. I expect to continue buying FSLR for years to come.
3 comments:
Hey Pyth, how are you? Still actively trading?
Hey Anon (who is this?), I'm good. I don't trade anywhere near as much as I use to, hardly at all actually. But lately there seem to be many opportunities, both long and short, mostly short. When I see something really compelling I'll take a stab via options (few months out) but I'm mostly buying and holding stocks for long term cap gains.
That was actually pretty interesting,its a shame more people are not investing in solar power and other forms of green technology. I wonder if consumer costs will decrease in the next 10-20 years? With the ever increasing oil shortages, will the cost of solar production increase or decrease? The world faces a huge lack of resources, especially water. But I hear water filtration systems are becoming more sophisticated and useable on larger scales, like salt water filtration systems. Poor fishes, first we hunt them in their habitat, then we drain their habitat. Sadness...
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