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Guest Klothilde

First Solar (FSLR)

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2 minutes ago, Klothilde said:

I would agree if we had the risk of a big discrepancy between market values and contract values (meaning 20% or more like in 2011), but unless the tariffs are dropped I don't see this happening. Currently mono-PERC sells for around 38 Cts in the States.  Let it drop 10% to 34-35 Cts in 2020 with the tariff step-down, that would be roughly at par with the prices that FSLR has locked in for its backlog. Also I don't think the CNs have the leeway to go down with prices much further given that they are already writing losses or are barely break-even.  Some companies like GCL even expect a price rebound.

The capital preservation point is let's be open to circumstances evolving and not rely too much on something:

17 hours ago, Klothilde said:

Nothing can change their top line in 2020, not even the meteorite that killed the dinosaurs. 

In early 2011 a lot of investors salivated over the fixed prices as input costs fell and they did the math on the margin impact. Of course those bloated margins to one mid part of the chain being accommodated by the rest of the chain was never realized and pulling up a chart of how investors re-priced our favourite stocks in 2011-2012 could be a sobering history lesson. Even poly suppliers had to change prices for their fixed price and volume "take or pay" contracts. When companies try to reassure investors with messages of "sold out at fixed prices" it is usually time to take the money and run in this industry.

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@Klothilde 

Do you know what the capex per watt is going to wind up being for S6 modules when they have it ramped? What is the life cycle they are expecting for the equiptment? 3 years? 5 years? 8 years?

 

JKS indicated for mono wafer to module Capex is around $0.12 for  Perc and $0.10 for non Perc. Based on a 5 year life span that is about $0.02/watt capex. They will likely use 8 years and come in at $0.015.

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I don't know it off the top, last figures I remember are 25-30 cts/W greenfield.  Their useful life of machinery has traditionally been estimated at 7 years.

I'm not taking those Junko figures at face value, it's not in line with data from serious companies such as Longi and Tongwei.

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Jinko is not a "serious" company????

I guess it's easy to criticize someone else's business model if you just choose not to believe their figures.

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I've lost count of how many times they have lied to investors.  I buy their audited financial statements but not much more than that.  That's just me.

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Understood.  But again, the proof is in the reported earnings.  And even if you're 100% justified in disregarding their forecast numbers, the fact remains that just making up your own numbers instead isn't any better.

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So good old Goldman Sachs once again raises.  Buy to Conviction Buy (they REALLY mean it this time and PROMISE not to sell it off this time) and from $64 -> $75.  A lot must have changed for them in a few weeks.  What, they're upgrading FSLR every month this year?  What's next "Strong Conviction Buy" with $85 target?  

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First Solar analyst commentary at Roth Capital  First Solar price target raised to $75 from $60 at Roth Capital. Roth Capital analyst Philip Shen raised his price target for First Solar to $75 from $60 ahead of quarterly results. The analyst continues to see upside to the stock as he expects the tight module supply in the U.S. to sustain through 2019 and support bookings in 2021 and beyond. Eventually, Shen expects bookings beyond 2020 to support further capacity expansion, though this will likely come into focus in the second half of 2019 and does not expect an announcement on the Q1 call. He reiterates a Buy rating on the shares.
 

 

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5 hours ago, Klothilde said:

I missed the con call you guys. Any improvement or still on the brink of banktruptcy?

Nope, if anything accelerated rates of decline as their margins appear to be lowered for the year based on net income remaining flat but revenue guidance being raised. This would suggest that gross margins might be crumbling as they would appear to be 7% lower than last guided 3 months ago. This is a disturbing trend that continues since last years HUGE miss by FLSR from year end results vs beginning of year margin guidance. 😊

 

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5 hours ago, Klothilde said:

I missed the con call you guys. Any improvement or still on the brink of banktruptcy?

Run while you can.  I like to think how this will look a few quarters from now, given the "3 handle" on sales locked in through Q1, 2021 now that was mentioned a couple times on the call.  That 3 handle on ASPs will look nice once they finally get fully ramped and all these EPS misses are a thing of the past.  

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8 minutes ago, Mark said:

Run while you can.  I like to think how this will look a few quarters from now, given the "3 handle" on sales locked in through Q1, 2021 now that was mentioned a couple times on the call.  That 3 handle on ASPs will look nice once they finally get fully ramped and all these EPS misses are a thing of the past.  

Can you explain for me what the 3 handle ASP is? Thanks/

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They're booking at .3x a watt on contracts into Q1 2021 per Widmar.  I'll go ahead and assume its .30 or .33, but neverthless, its not in the sky is falling low 20s ASPs of the Chinese.

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Not everything is lost.  There are also some good things.  EPS guidance is steady.  They are meeting their S6 cost targets.  ASP of module backlog is constant.  Vietnam 2 ramping ahead of schedule.  Again, it's not as horrible as some say.

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7 minutes ago, Klothilde said:

Not everything is lost.  There are also some good things.  EPS guidance is steady.  They are meeting their S6 cost targets.  ASP of module backlog is constant.  Vietnam 2 ramping ahead of schedule.  Again, it's not as horrible as some say.

Wow FSLR suggested  EPS guidance is at risk as they now caveat a downside risk of 22% on the low end guidance.

 

OMG!!! How the Heck can FSLR survive with module margins of -14%. Even when backing out their $35M ramp costs they are only making what looks to be 5% margins. You talk about the Chinese selling at costs, FLSR is selling below costs. 

 

That bread and butter  project business is a mess. They now are suggesting that they do not have the S6 capacity for their contracted builds due to ramp issues and are substituting in S4 in place and taking penalties for doing so. They are having issues with contractors and the costs they are having to pay the contractors being higher than expected. They even suggested that some construction contractors are in financial peril and there. There is risk in the California markets that may cost 20% of their earnings. Forget the fact that they mentioned that profits from Japan are lower than expected and they are pulling some of those in to prop up 2019 earnings.

 

Now  they just burned through $500M in cash and added 30% in debt.

 

What is going on with FSLR and their executions?  

 

 

 

💕💕💕💕💕

 

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I've had my fair share of drama today with the kids so need no more.

All these issues are peanuts compared to what's cooking at JKS's or CSIQ's.  FSLR will make so much money over the next two years it s just obscene.  

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Argus analyst David Coleman raised his price target on First Solar to $66 and kept his Buy rating after its raised FY19 revenue outlook, saying the company is well positioned in the solar industry given its "positive cash flow, solid balance sheet, and focus on cadmium telluride technology." The analyst also believes that First Solar is attractively valued at 22.1-times his expected 2019 earnings, which is around the middle of the 4.5- to 37.7-times historical average range and below the peer median of 26.3-times.

UBS analyst Jon Windham kept his Buy rating and $73 price target on First Solar after its Q1 results, saying the company's maintained guidance in spite of the Q1 earnings miss sets it up for an "aggressive sequential earnings ramp." The analyst believes that EPS growth is supported by First Solar's "ramping 3rd party Series 6 shipments" as well as declining start-up expense and expects investor sentiment on the stock to improve. 

Oppenheimer maintains a hold

 

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Well honeys the stock is up despite the heavy bashing earlier here. 

Let's just hope CSIQ behaves just as good after its ER. 🤪

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"First Solar analyst commentary at JPMorgan  JPMorgan adds First Solar to Focus List, boosts target to $72. JPMorgan analyst Paul Coster added First Solar to his firm's Analyst Focus List and raised his price target for the shares to $72 from $70. The company's Q1 results indicate it is heading toward a "strong earnings inflection" on the back of the Series 6 ramp, and this is not fully priced into the stock, Coster tells investors in a research note. He sees potential upside to 2020 earnings estimates and views First Solar as a near-term idea. Coster keeps an Overweight rating on the shares."
https://thefly.com/landingPageNews.php?id=2903455

You guys, here's me thinking to myself:  They had -$0.6 in EPS in Q1 and for Q2 they've indicated break-even.  Thus in order to meet their mid-range EPS guidance for the year of $2.5  in the second half they have to bring in $3.1, thus in average $1.55 per quarter.  Given the ramp in S6 shipments and margin the split could be s.th. like $1.35 in Q3 and $1.75 in Q4.

You guys get my logic?  I think $1.5 - $1.75 per quarter is something completely unattainable by the CNs that are left.  So why the hate towards FSLR?

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21 minutes ago, Klothilde said:

"First Solar analyst commentary at JPMorgan  JPMorgan adds First Solar to Focus List, boosts target to $72. JPMorgan analyst Paul Coster added First Solar to his firm's Analyst Focus List and raised his price target for the shares to $72 from $70. The company's Q1 results indicate it is heading toward a "strong earnings inflection" on the back of the Series 6 ramp, and this is not fully priced into the stock, Coster tells investors in a research note. He sees potential upside to 2020 earnings estimates and views First Solar as a near-term idea. Coster keeps an Overweight rating on the shares."
https://thefly.com/landingPageNews.php?id=2903455

You guys, here's me thinking to myself:  They had -$0.6 in EPS in Q1 and for Q2 they've indicated break-even.  Thus in order to meet their mid-range EPS guidance for the year of $2.5  in the second half they have to bring in $3.1, thus in average $1.55 per quarter.  Given the ramp in S6 shipments and margin the split could be s.th. like $1.35 in Q3 and $1.75 in Q4.

You guys get my logic?  I think $1.5 - $1.75 per quarter is something completely unattainable by the CNs that are left.  So why the hate towards FSLR?

Did first solar Give Q2 guidance numbers for revenues and margins?

 

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2 hours ago, Klothilde said:

"...And as discussed previously, we expect the majority of earnings to be in the second half of the year with Q2 close to breakeven and potentially in a loss position..."
https://seekingalpha.com/article/4259374-first-solar-inc-fslr-ceo-mark-widmar-q1-2019-results-earnings-call-transcript?part=single 

So no Q2 revenue guidance. 

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3 hours ago, Klothilde said:

So why the hate towards FSLR?

There's no "hate" towards FSLR.  Just realism.  The rosy projections for continued large quarterly profits are based on tariff protections and an S6 cost advantage over their competitors.  Both of those are going away.  That's not to say FSLR won't be able to adapt, but they already trade at 2-3x CN valuations.

FSLR may be a viable choice for a diversified solar portfolio, but I would be VERY careful to make it my ONLY solar stock.  They are richly valued right now, and they do face challenges in their future.

Just my two cents' worth.

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1 hour ago, solarpete said:

...That's not to say FSLR won't be able to adapt, but they already trade at 2-3x CN valuations...

Well shouldn't the CNs trade well below FSLR if their EPS is set to be way less? I think you haven't realized how much the earnings power of the CNs has come down.

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If FSLR were already making those juicy profits you're anticipating, yes.  But they're not--in fact, far from it.  So my point is RIGHT NOW, FSLR is at best fully valued, and at worst grossly overvalued.

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No, of course not.  In fact, the concept of FUTURE earnings is what creates a "market" (a place of varying buy/sell offers) in the first place--if a stock price were just based on current earnings, there would be no significant disagreement on that number and hence no divergent buy/sell offers.

But that vision of the future is just that--a vision, not a guarantee.  Expectations of future performance must be based on, and tempered with, current execution.  And the assumptions of that vision should be examined.

FSLR is fairly priced for significant future earnings, at a time when they have no earnings at all.  If the future comes to pass as expected, I don't see their share price advancing much more--the expectation of those profits is ALREADY baked in.  If, on the other hand, the assumptions of a guaranteed market advantage in that future do NOT materialize, their profits will be less than expected, which will likely lead to a share price decrease.

For me, that risk is too high right now.  If FSLR were still sitting at $40, yes, that's a gamble worth taking.  Not at $60.  Especially not with 100% of your investment capital.  But that, of course, is your decision, and yours alone.

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On 5/6/2019 at 6:06 PM, solarpete said:

...but they already trade at 2-3x CN valuations...

 

On 5/6/2019 at 11:33 PM, solarpete said:

...If FSLR were still sitting at $40, yes, that's a gamble worth taking.  Not at $60...

Sounds like you consider FSLR overpriced because it's trading in the 60s vs CN peers who are in the 20s.

Note that this divergence disappears when you factor in the companies' different net cash/debt positions and look at enterprise value.  Currently FSLR trades at an EV/share of $47 which is in line with CSIQ at $48 and JKS at $54.

 

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No, I consider FSLR overpriced because they're trading at $60 when earnings-wise they are at breakeven over the past 12 months.  The current stock price assumes a return to profits that has yet to take place, and that in my mind at least is far from assured.

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