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Guest Klothilde

First Solar (FSLR)

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13 hours ago, Mark said:

I didn't read his latest gem, but I mean they're sold out into 2020.  By the time they actually have more capacity online and ready to take orders, those tariffs will be largely phased out anyway.  I never truly bought into the idea that tariffs were going to substantially impact FSLR in the first place, beyond locking in some longterm term bookings, which are already locked in now.  I feel like any benefit they got from tariffs has been baked in for a while.

I would be a bit careful about too much reliance on bookings in the face of risk of major market changes. Wafer makes made the same claim in 2011, that all their capacity were booked for a long-time at not just fixed volumes but also at fixed prices. However when those fixed prices became unviable in the market the contracts had to be re-negotiated. In reality the fixed prices no longer exists in the solar supply-chain as it has become clear that they cause too much disruption. The fixed volume remained though. Normally new volume was contracted at a much lower price than market to get the average price of the total contracted volume market aligned while committing to more volume. This allowed major players to retain market-share from new entrants. At the end of the supply-chain this solution is more difficult and could instead lead to conflict with customers if re-negotiation is not offered.

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To Mark:

I agree with you the excuse is not valid, because as you point out, they've already booked their orders.  But inasmuch as one can ever know what drives a stock price these days (with all the algo-driven trading), I think this is a reasonable explanation (for the irrationality of the market).

Looks like a good entry point for another swing trade.

Edited by solarpete
Forgot to indicate to whom the response is.

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I don't think there is a reason.  The market and all of us naturally want to find reasons behind every move.  It's human nature, afterall.  It's why people think there's a God up there in the universe.  I think this is nothing more than profit taking after a big run over the last year+ and at a spot in their growth when new money may be attracted to the stock, but old money wants to lock in some surf and turf dining.  The question becomes when and how much do the profit takers come back in?  

In thinking about it the last few days, I don't think there is any reason beyond profit taking. 

 

Edit: I hope I'm right and this isn't the whole market taking a dump due to all the reasons it could.  (aka, anything Trump does to us and the economy)

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Mark, did you sell some FSLR at $80?  I thought that was what you said you would do.

I hope you did.  Now, you can buy back in with $12 (15%) discount.

FSLR is a fine company, but I thought at $80, it was too high.  I think it had a good run and this is just some profit taking after a good run.  I know I would.

Good luck.  I think it will spring back to $80 again soon (after this bout of profit taking).

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I didn't sell nearly enough, that's for sure.  I still have a nice chunk of shares at 69.50, so I can't claim to have nailed that trade. I should have unloaded it all.  Never thought it would fall this far, but that's always when it happens, eh?

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https://www.bloomberg.com/news/articles/2018-05-11/gop-senators-want-to-exempt-giant-solar-farm-panels-from-tariffs

I suppose this news tanks FSLR on Monday.  Friday had some support from Morgan stanley.   So maybe the bad & good news cancelled each other out.

 

This is getting silly though...  tariffs on panels for residential but not on panels for Utility.  Is there actually any difference between these types of panels?  You'd pay a tariff based on how you are planning to use the panel??

Edited by sunnypease

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On ‎5‎/‎12‎/‎2018 at 6:45 PM, sunnypease said:

https://www.bloomberg.com/news/articles/2018-05-11/gop-senators-want-to-exempt-giant-solar-farm-panels-from-tariffs

I suppose this news tanks FSLR on Monday.  Friday had some support from Morgan stanley.   So maybe the bad & good news cancelled each other out.

 

This is getting silly though...  tariffs on panels for residential but not on panels for Utility.  Is there actually any difference between these types of panels?  You'd pay a tariff based on how you are planning to use the panel??

There's a difference in size and efficiency. Small efficient panels are suitable for the space limited residential segment and larger lower efficiency (cheaper) panels are suitable for the utility segment. Sunpower makes the former. First Solar makes the latter.

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On 5/1/2018 at 12:05 PM, explo said:

I would be a bit careful about too much reliance on bookings in the face of risk of major market changes. Wafer makes made the same claim in 2011, that all their capacity were booked for a long-time at not just fixed volumes but also at fixed prices. However when those fixed prices became unviable in the market the contracts had to be re-negotiated. In reality the fixed prices no longer exists in the solar supply-chain as it has become clear that they cause too much disruption. The fixed volume remained though. Normally new volume was contracted at a much lower price than market to get the average price of the total contracted volume market aligned while committing to more volume. This allowed major players to retain market-share from new entrants. At the end of the supply-chain this solution is more difficult and could instead lead to conflict with customers if re-negotiation is not offered.

We might see some contemporary examples of this failed history lesson now as we might be ”in the face of risk of major market changes”.

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Yes but no but yes but. The thing is that the ASP of those module deals is not that great. If you project the Chi cost forward and slap the tariff on it you wont be that far off to the contracted prices. I'm out with the girls now, but as soon as I'm back I'll throw you a number bone.

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15 hours ago, explo said:

We might see some contemporary examples of this failed history lesson now as we might be ”in the face of risk of major market changes”.

Sorry for the confusion. I meant we will see how much the capacity already sold out until 2020 can protect margins during a demand setback. My view is that it protects volumes for big players thus forcing small players out of market, but margins will take a hit. Contracted volumes will be purchased causing inventory build up or re-selling to spot markets. Contracted volume prices need to adjust to accomodate this. There is no margin protection by contracted upstream capacity in this industry anymore after it became clear that the concept was flawed for the current state of the industry in 2011. Big players simply have to absorb a period of margin compression to get even bigger in the end. When I claimed this view before it was pretty much rejected by those new to the game. They get a chance to see the game in this part of the cycle now.

Edited by explo

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Well Roth chopped off more than that of JKS and DQ PT.  33% and 36% respectively.  We are all in the same boat and it's called Titanic.

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1 minute ago, Klothilde said:

Well Roth chopped off more than that of JKS and DQ PT.  33% and 36% respectively.  We are all in the same boat and it's called Titanic.

Do you really feel that way in regards to FSLR, Klothilde?  Looking for your number bone you were gonna throw.  

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I've sold 6 july 20 FSLR 60 puts for 3.65 each.  

I'm hoping that I do not need to take delivery of 600 shares though!  

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Should have thought of this before.. but....

Do you all think that tomorrow's pvinsights report will already show the effect of these Chinese solar cuts?

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59 minutes ago, Mark said:

Do you really feel that way in regards to FSLR, Klothilde?  Looking for your number bone you were gonna throw.  

It's a tough situation for all the companies.  Obviously FSLR has a huge advantage to weather the upcoming storm through the tariff protection but it will take a hit on margins nevertheless.  And that's why the stock is suffering as well.

What I meant in my previous post is that imho the pricing of FSLR's contracted module volumes for the next years is not so high that it will lead to outrageous price premiums over market prices of comparable modules at that time and thus I don't share the opinion that they are headed towards a contractual mess with tons of breaches and renegotiations.

In the latest10-Q on p. 37 they claim to have "entered into contracts with customers for the future sale of 6.8 GWDC of solar modules for an aggregate transaction price of $2.5 billion."  That's $0.368/W for mostly S6 modules of efficiency at par with mono-PERC.  Given the tariffs I don't think the CNs will be able to price their mono-PERC modules in the U.S. significantly below that, even despite poly crashing.  Take out 25% of tariff (2019) out from $0.368 and you are left with $0.294/W.  I don't see the CNs producing mono-PERC for much less than that next year.

So that's the bone right there.

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Thanks, I appreciate the commentary.  What are you doing here? Buying more, taking profits or closing your eyes?  I'm currently closing my eyes. I had just bought back a bunch of shares a couple weeks ago.  Figures.  

 

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1 hour ago, Mark said:

"Even when factoring in taxes and a 30-percent Section 201 tariff, Chinese imports of solar modules to the U.S. would still have a pricing advantage in the mid-20 cents/W versus nearly 33 cents/W for American firms, Dumoulin-Smith said."

That's pure baloney.  Either typo or the dude is new in the business and has no clue.

As to your question I'm closing my eyes and imagining a green meadow with sunshine and birds.

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Speaking of analysts spreading nonsense.... there's only 1 analyst I wanna hear from.  Gordon has been dead silent for months on FSLR... no comments on capacity expansion even.  This kinda "bad" news out of China is what he's been waiting for.  Tomorrow maybe.

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