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Guest Klothilde

First Solar (FSLR)

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I can't answer that question, but I see a 0% chance of a buyback in 2019.  In fact, I hope they don't do one in the next 2 years... would rather them acquire someone or expand capacity.  A buyback or dividend in my opinion, would be a huge waste of money.  Something that should wait until 2022 to even be considered.

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1 hour ago, Usbstefan said:

Mark ... shorting of FSLR seems unreal. So much opposition to upward moves.

Similar to what's going on with ENPH.  When they start "showing the money," the squeeze is going to be epic.

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On 9/23/2018 at 6:37 PM, SCSolar said:

Those fat tarfifs are not as much an impact with the Costs basis dropping like a rock. 30% on a cost basis of $0.35 was significant pushing the average ASP  to around $0.45-$0.48. Now with production costs in the $0.23 and could be as low as $0.21 the dynamics change. The average ASP with freight Tarrif and Opex + profit is now at around $0.36-$0.37. That is soon to drop by   a penny or 2 as the tariff gets reduced by 5% in a few months. That places the new ASP at $0.345+/- with tariffs, freight, opex and profits.

Those ASP could be lower as there is 2.5GW  of tariff free modules. Those modules carry  another 6-8 cents in gross . That means that they can basically cut a penny or 2 off the ASP and still have decent profits from the U.S when all are blended.

Slap the $0.034  on FSLRs  $0.27  S4 cost basis  and you are profitless and operating at a loss with their near $100M a quarter in Opex.  That $0.34-$0.36 ASP is significantly down from the $0.50 you were expecting before the ASP collapse.

There is good concern  which  Godron Johnson mentioned  that FSLR might be looking at cancellations of contracts due to the ASP declines. FSLR a while back indicated 2 or 3 cent premium on a module would not kill a sale,. They are now looking at  a $0.10-$0.15 swing certainly that certainly could.

And we have not even discussed the ability of FSLR to compete outside of the U.S. markets where there are no  tariff impacts and the ASP is sub $0.30.

You guys, mono PERC is selling for nearly 40 cts in the States right now:
https://www.pvinfolink.com/index.php?lang=en

Some here wanted me to lose sleep over customers renegotiating contracts.  But it looks like I can sleep like a baby.

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1 hour ago, Klothilde said:

You guys, mono PERC is selling for nearly 40 cts in the States right now:
https://www.pvinfolink.com/index.php?lang=en

Some here wanted me to lose sleep over customers renegotiating contracts.  But it looks like I can sleep like a baby.

Yeah, analyst insistence that FSLR was going to re-negotiate DESPITE the company saying explicitly they weren't and aren't going to have to was pretty frustrating.  Perhaps an attempt to accumulate in the 40s for a run back to the 60s?  Where ya't Gordon?  We haven't heard a peep from you on these solars despite a LOT of things changing.  

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I trust statements from companies and their CEOs as far as I can throw them.  I've been burned NUMEROUS times by companies explicitly stating they would NOT do x, y, or z, only to have them turn around and do EXACTLY that, sometimes only a week later!

Having said that, there is no doubt something optimistic is afoot in the solar space.  (Have you looked at DQ lately?)  No reason FSLR shouldn't share in that general optimism.

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8 hours ago, Mark said:

 We haven't heard a peep from you on these solars despite a LOT of things changing.  

Can you explain what the "Lot of things changing." is in reference to?

 

Demand was 100GW in 2018 right in line with most estimates. 2019 is estimated to grow 20% or in line with estimates from last year. There are no changes in US tariffs or China FITs.  The ASP is still at basically cash costs. The component prices have had a slight uptick in the past week or 2 in part because of the typical China New years shut downs. The ASP for modules is still stagnant and was actually down slightly for thin film and Poly modules.  Rising input costs with a flat ASP that was near cash cost is in my opinion good.

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I'm even more bearish.  I think the non-subsidy regime in China will take a while to take off, so I'm eyeing 100-110GW this year.  I think the market will soften after Chinese new year and that some of the current optimism will fade when spot prices soften and the Q4 numbers / outlooks are communicated.  Well that's my current thinking so y'all know.  And I said DQ is headed for the single digits so my stakes are high.

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Have any earnings preview/predictions here on FSLR, Klothilde?

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I am not Klothilde but I do have a few predictions for the upcoming earnings. First off, the company should declare a fairly large tax refund. In 2017 First Solar took a $405M hit to repatriate its overseas earnings due to the new tax bill. Considering the one-time rate was 15.5%, this seemed like a massive overpayment. Management has a history of overpaying taxes and then claiming a big refund. Unless I am mistaken this should provide a huge ($1.5-$2) EPS beat.

The company has alluded to a potential refund in every earnings call and 10-Q this year. Here is what they said last time. "To relate, the U.S. tax reform enacted last December, we have not recorded any adjustment through Q3 related to our original estimates. We expect to finalize our accounting related to tax reform in Q4 based upon finalization of currently proposed tax regulations and the filing of our federal and state income tax returns."

Also, during the guidance call the company hinted at possibly expanding in either Vietnam or Ohio. It wouldn't be to surprising for them to announce construction beginning on a third plant in Vietnam. Also, management mentioned getting started on 5GW of projects to qualify for the ITC Safe Harbor requirements. This should mean that the projects pipeline should grow dramatically in the next few quarters.

Lastly, here's an article about a 135GW project getting developed in Cambodia. It would appear the company is still competitive internationally.

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I expect them to meet or slightly beat, though I haven't looked at the numbers in detail.  They are basically sold out for the next two years at fixed prices, so imo that leaves little room for EPS surprises either up or down.  Two positives are that prices in the U.S. are holding up well (despite the ominous 2.5GW quota for foreign cells) and that S6 certification is progressing as planned:
https://www.pvinfolink.com/post.php?sn=2
https://investor.firstsolar.com/news/press-release-details/2018/First-Solar-Series-6-Completes-CSA-C450-Test-Protocol-at-CSA-Groups-PV-Test-Lab-CFV-Solar/default.aspx

Imho FSLR will be quite boring over the next several quarters because they are transparent and predictable.  If you prefer a roller coaster with 50% swings then I'd suggest to stick with the CNs.

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First Solar risk/reward remains favorable into Q4 report, says Baird Baird analyst Ben Kallo previewed First Solar's Q4 report and he believes the risk/reward setup is favorable heading into the results. The analyst said he would be a buyer into the report as he thinks a recovering macro environment in the solar space could improve sentiment and drive share appreciation. Kallo said it remains a top pick and he maintained his Fresh Pick designation while reiterating his Outperform rating and $75 price target on First Solar shares.

Read more at: 
https://thefly.com/landingPageNews.php?id=2864736

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I'll add that the 13Fs that have been trickling in for FSLR have been very sexy.  Some serious purchases last quarter on the weakness.

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First Solar analyst commentary at Roth Capital  First Solar price target cut to $60 from $65 at Roth Capital. Roth Capital analyst Philip Shen maintained a Buy rating on First Solar but cut his price target to $60 ahead of the company's February 21 earnings report. In a research note to investors, Shen says he sees some risk to shares heading into the report, as checks with multiple contacts suggest S6 bins may be ~5W lower-than-expected, and S6 manufacturing throughput may slower-than-expected. Sheh predicts the challenges could represent a ~1%-4% headwind to 2019 S6 margins. Though he believes this is solvable, and says the impact to long-term value could be modest, though he sees the potential for near-term share weakness. Read more at: https://thefly.com/landingPageNews.php?id=2865355

Read more at: 
https://thefly.com/landingPageNews.php?id=2865355

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I'm not gonna say his checks aren't valid and these aren't factual concerns, but ever since he kinda flipped on the company on that last call... I dunno, what soured with Shen?  He clearly went from FSLR bull to bear rather abruptly last year at some point.

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