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Guest Klothilde

First Solar (FSLR)

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If the Dems win the House... maybe we'll see some positive solar stock appreciation (both in nods and in dollars)?

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Sunpower Q3 numbers out you guys.  They are seeing order postponements due to the 531 thing.  Just like FSLR but way more pronounced I guess.  They also admit they have a hard time competing against mono-PERC in the U.S. utility market, which is a good thing for FSLR.  Somebody suggested recently SPWR could eat some of FSLR's cake in the U.S. but it seems they don't have teeth for that.  They did get a 201 exception for their 1.2GW of IBC capacity, however that product is apparently so expensive that they cannot compete against mono-PERC with tariff.

"In terms of Section 201, it's a tale of two markets. In the DG market which the company is restructured and focused on mostly, we actually see pricing in Q3 that is in line with Q2; whereas, if you're focused on the power plant market, which has different attributes, the pricing has been very difficult, and most of mono-PERC is going into the power plant market, and therefore, is facing a very difficult market."
https://seekingalpha.com/article/4216260-sunpower-spwr-q3-2018-results-earnings-call-transcript?part=single

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19 hours ago, Klothilde said:

Hmm... something sounds familiar here...

First Solar shares are 'significantly undervlaued,' says JPMorgan
https://thefly.com/landingPageNews.php?id=2813212

"JPMorgan analyst Paul Coster believes First Solar is "significantly undervalued" based on a sum-of-the-parts analysis which factors in the company's current projects and net cash position. Net cash currently represents nearly 60% of market value and the core module business is trading at about 3.9 times 2021 EBIT net of capex and pending project sales, Coster tells investors in a research note. He keeps an Overweight rating on First Solar with a $75 price target. He reminds investors that the company will provide fiscal 2019 guidance on an investor update call to be held in late-Q4, which he believes could serve as a positive catalyst."

 

The CN business is expected in China after the 531. The comments regarding the ASP bode well though for Poly players in the U.S. market such as Trina JKS and CSIQ.

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3 minutes ago, Klothilde said:

The current market has all the CNs FUBAR

What are you talking about????  The CNs (well, what's left of them--JKS and CSIQ) are actually UP 30-50% off their lows, and holding steady despite the market tanking 400 points/day.  Even DQ never hit your predicted teens (although it came darn close), is up 25% from there, and is also not falling back down.

It looks to me like "the market" has called a bottom on the CN solars.  Barring unexpected bad news, the expected direction is up from here.

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18 hours ago, solarpete said:

What are you talking about????  The CNs (well, what's left of them--JKS and CSIQ) are actually UP 30-50% off their lows, and holding steady despite the market tanking 400 points/day.  Even DQ never hit your predicted teens (although it came darn close), is up 25% from there, and is also not falling back down.

It looks to me like "the market" has called a bottom on the CN solars.  Barring unexpected bad news, the expected direction is up from here.

I was talking about the PV market and not the stock market.  Praise be that solar stocks are up, that allows for a decent exit if your heart is humble and not filled with greed.

As far as fundamentals go I think the CN PV industry at the moment is pretty much about producing for 25 cents and selling for 27 cents, with all its repercussions.  And not much change in sight in my glass bowl.

As far as DQ goes I saw it hitting the teens but my latest projection is it will hit single digits by the end of Q1.  Explanation is quite simple:  Soft poly demand meats humongous expansion in supply.

But that's just my view of things.  There are more bullish views out there of course.

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2 hours ago, Klothilde said:

As far as fundamentals go I think the CN PV industry at the moment is pretty much about producing for 25 cents and selling for 27 cents, with all its repercussions.  And not much change in sight in my glass bowl.

I do agree with you there.  But that narrow spread is what it's been like for the past several years already--nothing new there.  The big event all solar investors are waiting for is grid parity everywhere, which will drive the next explosion in demand, which will drive profits even if the margin is narrow.

We'll see about DQ.  Yes, there is new capacity coming online.  But their energy costs are also dropping 20% in Q1.  That should help them remain competitive.

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On 12/10/2018 at 9:16 AM, Klothilde said:

Any vibes ahead of the guidance call you guys?  The current market has all the CNs FUBAR but for FSLR it's no walk in the park either...

It would be interesting to see if management mentions this recent story about LeTID degradation issues with PERC. It seems like that could be a really nice selling point for First Solar.

Management said during last earnings call that it would discuss the IRS guidance establishing the ITC Safe Harbor requirements. 2021-23 could see a lot of systems business in the US and hopefully the company will discuss this in more detail.

Also, this article from earlier today is interesting. PI Berlin is now an approved testing institute for modules. The article only mentions series 4, however, but does state that PI Berlin has audited the series 6 factories. Not sure what this means.

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1 hour ago, Luz del Norte said:

It would be interesting to see if management mentions this recent story about LeTID degradation issues with PERC. It seems like that could be a really nice selling point for First Solar.

Management said during last earnings call that it would discuss the IRS guidance establishing the ITC Safe Harbor requirements. 2021-23 could see a lot of systems business in the US and hopefully the company will discuss this in more detail.

Also, this article from earlier today is interesting. PI Berlin is now an approved testing institute for modules. The article only mentions series 4, however, but does state that PI Berlin has audited the series 6 factories. Not sure what this means.

Apparently HQCL Quantum does not show the issue. 

https://www.pv-tech.org/news/hanwha-q-cells-touts-success-of-its-anti-letid-module-performance-in-fraunh

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Shen throwing cold water right out of the gate huh?  What, he feels bad for having that high price target?  Needs to bash a bit on the call to justify bringing it down more?  Thought it was well-handled by Mark, that margins are at or better than what was originally projected.

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One thing I don't like after crunching the numbers is that module cost comes up to approx. 25 cts per watt in avg. for 2019.  That is too high for my taste.  It basically says they are doing well thanks to Trump and would be fu**ed like everyone else otherwise.

P.D. However those 25 cts include shipping and warranty, and considering 2019 is the big S6 transition with plenty of process streamlining I'm willing to give them a pass on cost.  Important thing is 2020 will be on a solid cost foundation, with S6 streamlined and OPEX reduced below 6 cts per watt.

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Help me out here guys, my glass ball tells me EPS in 2020 will grow to around $4,5 - $5,0 mainly by migrating fully to S6.  Can someone else corroborate?  That would be awesome.

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First Solar price target lowered to $73 from $85 at UBS

UBS analyst Jon Windham lowered his price target for First Solar to $73 but keeps a Buy rating on the name following last night's 2019 guidance. The good news is that the underlying profitability for Series 6 appears to be materializing, Windham tells investors in a research note. The bad news, however, is that start-up expenses are likely to weigh on 2019 overall operating margins, adds the analyst. While Windham says it is not a great idea to play a "waiting game" with solar stocks, he views First Solar's valuation as "relatively depressed" at current share levels.

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First Solar price target cut to $74 from $85 at Cowen Cowen analyst Jeffrey Osborne maintained an Outperform rating on First Solar but cut his price target to $74 from $85 following the company's 2019 guidance announcement. In a research note to investors, Osborne says Series 6 adoption has been strong and management has elected to accelerate the pace of its production ramp. He sees leverage longer term in FY20/FY21 given the view that S6 has a path to mid to high teens module costs over time vs. more expensive silicon based solutions. Osborne's new price target is based on ~14x his 2021 EPS estimate of $4.13, which reflects the company's visibility, full S6 ramp and a pricing environment not impacted by tariffs as well as a net cash balance exiting 2019 of ~$1.7B in cash, and ~$125M in remaining CapEx for the Series 6 ramp entering 2020.

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Ugly trading today.  I have to think this is manipulation which is easy to do in a screwed up market like we have for the past couple months.  Trading at a 2019 forward PE of what, about 18x right now at 41.43?  On the low end.  Looks like historic 5 year average is 22x for FSLR which would put us at $50 today if PE mattered.  I kinda wonder what DOES matter in solar, as I have for many years now.  Just trading vehicles, I know. But a boy can dream that one day this growth is appreciated and rewarded.  Series 6 is looking good.  But all the shorting going on in here today is irritating as heck.  

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1 hour ago, Mark said:

Ugly trading today.  I have to think this is manipulation which is easy to do in a screwed up market like we have for the past couple months.  Trading at a 2019 forward PE of what, about 18x right now at 41.43?  On the low end.  Looks like historic 5 year average is 22x for FSLR which would put us at $50 today if PE mattered.  I kinda wonder what DOES matter in solar, as I have for many years now.  Just trading vehicles, I know. But a boy can dream that one day this growth is appreciated and rewarded.  Series 6 is looking good.  But all the shorting going on in here today is irritating as heck.  

Not much shorting going on--trading volume is too low.  Just the usual reaction of a solar stock selling off on what is actually good news.  Happens in other names too.

Usually the selling stops after a day or so, and the stock then starts to climb.  FSLR should do well over the next couple of days (barring another Trumpertantrum tanking the markets again).

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8 hours ago, Klothilde said:

Help me out here guys, my glass ball tells me EPS in 2020 will grow to around $4,5 - $5,0 mainly by migrating fully to S6.  Can someone else corroborate?  That would be awesome.

If you assume that the systems business and ASPs are roughly the same between the two years, then your 2020 estimate seems plausible. The only difference would be the shift of the 2GW of S4 to S6. The estimated 2019 margins seem to be around 15% for S4 and 30% for S6 based on around 35 cent ASP. That would mean an increase in profits of around $105M. Considering the 2020 S6 costs should be lower, this seems like a low estimate. In addition, ramp and startup costs are expected to be $65M lower. Combined, these two things would push EPS over $4.

It sounds like the company plans on building at least one more factory in the near future. That would increase the 2020 startup costs. On the other hand, I would bet there is a lot of conservative guidance built into the numbers. Once the factories start producing at full capacity I bet the numbers will go up.

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1 hour ago, Mark said:

I kinda wonder what DOES matter in solar, as I have for many years now.  Just trading vehicles, I know. But a boy can dream that one day this growth is appreciated and rewarded.  Series 6 is looking good.  But all the shorting going on in here today is irritating as heck.  

Mark, if you look at First Solar's chart, until this latest dive under $50 the company has actually outperformed the S&P over its lifetime. I was shocked to see that. Looking at the spikes its been an insanely bumpy rollercoaster ride.

In hindsight it seems the way to have made money was to identify the troughs, load up, and then hold for a while. It really seems like FSLR is currently at a low point. It is hard to imagine a company that is sold out for two years, has a forward PE of around 16, and a large cash pile could fall much farther.

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26 minutes ago, solarpete said:

Not much shorting going on--trading volume is too low.  Just the usual reaction of a solar stock selling off on what is actually good news.  Happens in other names too.

Usually the selling stops after a day or so, and the stock then starts to climb.  FSLR should do well over the next couple of days (barring another Trumpertantrum tanking the markets again).

That was a lot of shorting, I watch the tick by tick.. clear as day there was plenty of shorting going on in there.  100 shares at a time.  

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And then, the covering, equally predictable.  Those $42 puts yesterday weren't going to expire worthless for whoever put them on.

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Luz ... its hard to know exactly, but my runs come out to your levels. Additional detail on which modules are being used (i.e., 4 vs. 6) for systems, etc. is what makes it hard to pinpoint to exact detail. Approximate figures for me indicate that without the series 6 transition costs, plus better economics of series 6 will bring them up above $4.00 eps easily. This assumes ASP stay firm. Either way, they seem to have built a cushion for 2021 and are in the midst of planning addition measures for that period (i.e., safe harbor, additional capital spending, etc.). 

I though the call was find. FSLR seems to be executing great. Soon to come ... efficiency gains?

 

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