Pick #3. (Source Bapcha's Stocks)
First Solar. I picked FSLR at #3 - despite their superior gross margins because:
a. Sand is cheaper than CdTe [but like it was already mentioned in a prior paragraph, it takes a lot of cheap energy to make pure Solar-cell grade silicon].
b. Thin film based solar panels [the kind FSLR makes] are less efficient than silicon-based PV modules.
c. Apart from being less efficient, thin-film based solar cells have much worse performance at low-light conditions - compared to silicon based solar cells.
d. FSLR sells at a premium valuation. At $110/share, FSLR’s market value of $9 Billion is a multiple of 9x TTM sales. On a TTM PE basis, the stock sells at 32x.
Notes:
A. Double digit ROI calculations based on a PV system that generates 4KW. We priced the system through multiple installers, and assumed a PG&E credit of $1.90/Watt and the Federal Tax Credit (30%) for grid connections after Jan 1, 2009.
B. We focus on gross margins and growth rates and cash flow in this article. While we did look at earnings, PE, etc., what matters for semiconductor companies - is valuation, gross margins and growth rate.
C. The “President Elect Effect” impacted these stocks positively only for a week - as the market realized that all that the part of the $850 Billion that affects alternative energy does - is to continue the subsidies for businesses and increase subsidies from a $2000 tax credit/installed system to a credit of 30% of the cost of an installed system - for individuals. The non-business PV market represents only about one percent of the total US PV market.
D. FSLR’s modules are the hardest to recycle [though the company will gladly do it for you if you ship it to them to the appropriate location].
E. STP uses both poly and single crystalline silicon based cells in their PV modules.
F. No positions in any of the mentioned stocks.