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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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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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So was Phil Shen just helping steal shares from the hands of the non-believers Friday?  Glad he didn't get any of mine on Friday, though I did ring the register 3 times today.  Hoping for a CSIQ repeat, so trading with 1/3 of my position, holding the rest.  Analysts... gotta hate them.

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Results are out.  Midpoint of guided 2019 earnings = 2.50.  That's a P/E of 20 at today's stock price.  20!  Really?  For a solar??  Even for a non-Chinese one, that's pretty rich.

If you trade around your FSLR position, fine.  But for a buy-and-hold, it looks like dead money at best for a year, with the distinct possibility of a decline from here.

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22 minutes ago, solarpete said:

Results are out.  Midpoint of guided 2019 earnings = 2.50.  That's a P/E of 20 at today's stock price.  20!  Really?  For a solar??  Even for a non-Chinese one, that's pretty rich.

If you trade around your FSLR position, fine.  But for a buy-and-hold, it looks like dead money at best for a year, with the distinct possibility of a decline from here.

I have similar feelings.  Capacity constrained for what seems like 5 years and benefits coming not until Q3/Q4... can't see why anyone would be eager to buy this until they finally show that S6 is cooking and margins are stable or rising and this S6 story is in full swing.  I don't have much trust in the story at this point.  I also can't see where the growth comes from when they're fully booked and still ramping.  The Chinese can scale up quickly and grow fast.  FSLR seems like I'm holding a high risk savings account right now, rather than something that has the possibility of actually growing.  The thing could be stuck in a 40-50 range for a year is how I feel.  The call didn't make me feel much different.  

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27 minutes ago, solarpete said:

Results are out.  Midpoint of guided 2019 earnings = 2.50.  That's a P/E of 20 at today's stock price.  20!  Really?  For a solar??  Even for a non-Chinese one, that's pretty rich.

If you trade around your FSLR position, fine.  But for a buy-and-hold, it looks like dead money at best for a year, with the distinct possibility of a decline from here.

I think the market is looking beyond 2019 into 2020+.  2020 EPS will be much higher than 2019 EPS because this year there's a significant EPS ramp from quarter to quarter due to the S6 production ramp and correlating cost reduction.  They said they will even post a loss in Q1.  Going into Q1 2020 they should be churning out $1.0 in EPS per quarter at least.

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1 hour ago, Mark said:

The thing could be stuck in a 40-50 range for a year is how I feel.

Unfortunately, I think you're right.  But take heart--I think you DO trade with your position?  You should be able to make at least some profit doing that over the next year.  Barring some unforeseen cataclysm, they'll make that 2.50 in earnings.  So when the price drops a little, buy a little more, then sell it when it goes back up a little.  In other words, trade the fluctuations in small batches.  It's unlikely you'll get caught holding the bag on trading shares bought at any given level, as I don't think their price will collapse dramatically.  So any small drop should eventually be followed by a small rise.

I've done this quite successfully for several years now, with virtually all the names in the solar space (yes, even with a few shares of FSLR).  Over time, those small gains DO add up.  And it at least gives me the illusion of doing SOMETHING while I'm waiting for the solar industry to get its act together, business-wise.

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1 hour ago, Klothilde said:

I think the market is looking beyond 2019 into 2020+.

For solars, I most emphatically think the market does NOT look that far out.  In the past, any headwinds, even if small and temporary, have usually translated into falling stock prices, even if the longer-term outlook remained positive.

For your sake, I hope you're right that 2020 earnings will be much better than 2019.  But realistically, I think it will be closer to 2020 before the stock price reflects that expectation.

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Yeah, I'll be taking a hit tomorrow on my trading shares.  I sold about 1/3 of my position today before the close.  Will sell another third tomorrow, at least, and maybe the whole position.  My only problem is I have some 'hold' shares north of 60 which apparently will be sitting there and hopefully be worth something more than 70 bucks in late 2020?  Assuming of course we don't have a recession in there to trash the whole market or technology doesn't change or ASPs don't fall farther or there isn't a fire in the Ohio plant.... dunno, lots of "if"s on this slow growth, high risk train. Maybe I'll wake up fresh and less cynical.  

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9 hours ago, Mark said:

Yeah, I'll be taking a hit tomorrow on my trading shares.  I sold about 1/3 of my position today before the close.  Will sell another third tomorrow, at least, and maybe the whole position.  My only problem is I have some 'hold' shares north of 60 which apparently will be sitting there and hopefully be worth something more than 70 bucks in late 2020?  Assuming of course we don't have a recession in there to trash the whole market or technology doesn't change or ASPs don't fall farther or there isn't a fire in the Ohio plant.... dunno, lots of "if"s on this slow growth, high risk train. Maybe I'll wake up fresh and less cynical.  

Good on you unloading that POS before the close, I would give up the rest today.

FSLR targeting 2.5 EPS for 2019 while CSIQ making 3 EPS for 2018.

FSLR trading at 20 x Forecasted earnings.

CSIQ trading at 7 x current earnings.

Why would anybody in their right mind be buying FSLR over CSIQ?

And all this without taking into account the end of the Trade War which will make chinese producers even more competitive. If the trade war ends in the near future, I can very easily see CSIQ trading above FSLR's nominal price.

Edited by tupapa

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Imho that's not completely apples to apples.  For starters you gotta compare forecasted EPS to forecasted EPS and while there's no 2020 numbers out yet for CSIQ the market seems to be thinking that earnings are heading down.

Also bear in mind that the leverage of a company plays its part in the valuation.  Means that CSIQ would be trading higher if it didn't have so much debt on balance sheet.  From a PB perspective both companies (CSIQ & FSLR) are currently valued similarly at a PB ratio around 1.1 so no "injustice" there.

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1 hour ago, Klothilde said:

Imho that's not completely apples to apples.  For starters you gotta compare forecasted EPS to forecasted EPS and while there's no 2020 numbers out yet for CSIQ the market seems to be thinking that earnings are heading down.

Also bear in mind that the leverage of a company plays its part in the valuation.  Means that CSIQ would be trading higher if it didn't have so much debt on balance sheet.  From a PB perspective both companies (CSIQ & FSLR) are currently valued similarly at a PB ratio around 1.1 so no "injustice" there.

Actually the market seems to be thinking quite the opposite, namely that csiqs earnings are heading north whilst fslr's are heading south.

Which is why CSIQ was up 3% yesterday whilst fslr was down 5%. Simple.

Edited by tupapa

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13 hours ago, Klothilde said:

I think the market is looking beyond 2019 into 2020+.  2020 EPS will be much higher than 2019 EPS because this year there's a significant EPS ramp from quarter to quarter due to the S6 production ramp and correlating cost reduction.  They said they will even post a loss in Q1.  Going into Q1 2020 they should be churning out $1.0 in EPS per quarter at least.

Kloth

 

Do you have a production cost estimate of the series 4 from 2015? They indicated in the con call the estimated savings for series 6 is 40% off that number and then add a penny for increased framing costs. A penny on say $0.20 is 5% in gross costs increases.

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3 hours ago, tupapa said:

Good on you unloading that POS before the close, I would give up the rest today.

FSLR targeting 2.5 EPS for 2019 while CSIQ making 3 EPS for 2018.

FSLR trading at 20 x Forecasted earnings.

CSIQ trading at 7 x current earnings.

Why would anybody in their right mind be buying FSLR over CSIQ?

And all this without taking into account the end of the Trade War which will make chinese producers even more competitive. If the trade war ends in the near future, I can very easily see CSIQ trading above FSLR's nominal price.

You have not only the trade war, but the unwinding of the ITC tax credits that will come creating pricing pressures. This year the ITC is 30% tax credit , next years projects qualify for 26% in 2020 and  22% in 2021. The ITC falls to 10% for commercial and grid after 2021. 

As the S6 ramps, the projects costs are going to have to drop 25% over the next 3 years. This will be heavily felt in the module ASP as it is some 30-40% of the cost to build in the U.S.

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24 minutes ago, SCSolar said:

Kloth

 

Do you have a production cost estimate of the series 4 from 2015? They indicated in the con call the estimated savings for series 6 is 40% off that number and then add a penny for increased framing costs. A penny on say $0.20 is 5% in gross costs increases.

I think 2016 is the baseline.  I have them at 34 cts at baseline dropping to around 20 cts for S6.

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