First Solar (FSLR)

News that FSLR aims to lower the price of their modules (already one of the lowest in the market)via increasing manufacturing facilities will make their product more viable for various projects all over the world.

Increasing customer base and maturing of preliminary power fields have made a good arguments to investors and their clients about the level of technology and reliability of their product for large scale projects.

July 16th the company annouced two project wins in California.

The first is 2 MW of the 250 MW Southern California Edison (SoCal) rooftop installation. The second is the 7.5 MW system install near Blythe, California, which has a potential to expand to 21 MW; the bid was inherited from Turner Renewable Energy. Separately, enXco, an EDF Energies Nouvelles company, unveiled a 1.2 MW PV array using First Solar panels. The system, located outside of Sacramento, was built for the Sacramento Municipal Utility District.

The advent of CdTe- The traditional amorphous silicon seems to be 2 years behind CdTe. It can achieve efficiency rate of over 10% as compared to the industry usage of about 6-7%. This happens to give FSLR a sizeable advantage over the rest of their competitors. It is already a leader in the thin film PV market and can leverage upon its advantage to research and improve on the CdTe efficiency rate as well.

Continuing shorting of silicon will push customers to evaluate the growing market of thin-film PV modules which already demonstrate a substantial $/Watt advantage of traditional silicon PV modules.

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.

The mere fact that the stock price is doing so well versus the S&P500 is a good argument for buying. As of December 20, 2007 with the index up barely 5% over the last 200 days FSLR is up 375%. Source: StockCharts Tools/Relative performance Chart.Refrus 15:06, December 22, 2007 (PST)