First Solar Blows Past Estimates… Again
First Solar (FSLR) reported numbers that surprised to the upside again. This is becoming a theme that Wall Street just doesn’t want to believe. Currently trading at less than a 20 P/E I still think this is one of the most attractive stocks available. Add in possible policy changes and this could be a $300 stock in a year.
For some reason the market and analysts don’t understand the advantage First Solar has in this market. They operate with 50% gross margins when competitors have 20% margins at best. They’re the lowest cost supplier and have a history of lowering production cost rapidly. Worst case scenario is a price war and they bankrupt all of their competitors.
Poly-silicon is the technology most competitors use and poly prices have been falling for a couple of years now. Problem is, even if prices fall to $0 their manufacturing costs are still higher than First Solar’s. So how can they compete on a mass scale.
The other change in the market is the move toward big utility scale projects from small roof-top and agricultural developments. This should also help First Solar as they’re able to compete on cost and scale where others aren’t. The capacity just isn’t there for any other supplier to build gigawatts worth of solar panels.
Look for First Solar to continue to perform well in coming quarters. Some time in 2011 when costs go lower than natural gas the demand should really pick up.
Disclosure: The Mayor is long FSLR.