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Guest Klothilde

First Solar (FSLR)

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Investing Hobo doing a careful U-turn on FSLR, trying not to lose too much face.  Now claiming the stock is cheap only a few weeks after bashing the living daylights out of it.  Delicious.

First Solar's Series 6 Appears On Track To Hit Cost Targets
https://seekingalpha.com/article/4283380-first-solars-series-6-appears-track-hit-cost-targets

 

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Oh My, FSLR is transitioning out of the EPC project business and is going to the model where they sell to third party EPC suppliers.They are looking at letting go 100 people in the EPC business segment as a result of this shift in strategy.  Where is all that project revenue gonna be in a year or so? How are they going to compete globally when there costs are more expensive than the CN who have built global relationships now?

 

https://solarindustrymag.com/first-solar-transitioning-to-third-party-epc-model

 

First Solar Inc., a global provider of comprehensive solar PV systems, is transitioning away from its internal engineering, procurement and construction (EPC) model in the U.S. and moving toward third-party EPC partners.

The transition to will occur throughout the rest of 2019 and will not impact any projects under construction and slated for delivery this year, the company says.

...

...

...

The transition will impact approximately 100 associates, who will be separated from the company at various stages of the process and will be provided with compensatory and outplacement support, says First Solar.

 

 

 

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I don't see the need for drama cuz the market for sure has shrugged that off.  FSLR makes its margin with the module and with self-developed projects.  EPC is just a complementary business with low margin and a ton of risk, so I'm not surprised they're getting rid of it. 

The two priorities for FSLR I see are 1) getting cpw down to 15 cts/W ahead of the CNs and 2) scaling to 10GW quickly to get OPEX/W down to competitive levels.

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7 hours ago, Klothilde said:

I don't see the need for drama cuz the market for sure has shrugged that off.  FSLR makes its margin with the module and with self-developed projects.  EPC is just a complementary business with low margin and a ton of risk, so I'm not surprised they're getting rid of it. 

The two priorities for FSLR I see are 1) getting cpw down to 15 cts/W ahead of the CNs and 2) scaling to 10GW quickly to get OPEX/W down to competitive levels.

This is the beginning of FSLR end. First - they exit EPC business, and then - they exit PV modules business. Not good... :-((((

  • Haha 1

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3 hours ago, Klothilde said:

That looks to be a formal announcement of the customer they referenced in the con all on August 1. 

"Representative of this, we have secured our largest Series 6 agreement with a new customer to supply 1.7 gigawatts of deployment of projects across the U.S"

 

Considering they are effectively booked out for 2019-2020 and part of 2021, any new contract announcements would be a 2021-??? type of contract and not a 2020 contract.

 

"As noted in the Q1 earnings call we are effectively sold out through the remainder of 2019 and full-year 2020. With the most recent bookings, 2021 is starting to book up relative to an anticipated supply plan of 6.5 gigawatts. For full-year 2021, we booked and contracted volumes subject to conditions precedent representing approximately 60% of the supply plan. This leaves approximately 2.5 gigawatts to be booked in 2021."

 

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Let's get the word out there you guys, it's just not fair how the market is reacting.  This fresh from the fly:

Tariff exemption positive for First Solar, says Cowen
Cowen analyst Jeffrey Osborne said the US Trade Representative pulled the tariff exemption for bifacial solar panels which were exempt from the current 25% tariff. The analyst said he expects a favorable reaction from First Solar (FSLR) shares and to a lesser extent SunPower (SPWR). He said the sharp increase in bifacial capacity coupled with a China slowdown has pressured the shares recently but this should provided some relief. Osborne maintained his Outperform rating and $83 price target on First Solar shares.

Goldman says U.S. solar makers should benefit from end of bifacial exemption Goldman Sachs analyst Brian Lee noted that the Office of the United States Trade Representative said it will withdraw a previously granted Section 201 tariff exemption for bifacial solar panels, which he sees removing a key potential overhang for solar panel pricing and U.S. competition and also believes was unexpected by most investors. Lee thinks U.S. solar manufacturers such as First Solar (FSLR) and SunPower (SPWR) are key beneficiaries of the news, while Chinese solar panel makers with bifacial capacity expansion plans, including JinkoSolar (JKS) and Canadian Solar (CSIQ), are most likely to be negatively impacted. Lee has Buy ratings on First Solar, SunPower and Canadian Solar and a Sell rating on JinkoSolar.
 

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First Solar to benefit from bi-facial solar panel tariff, says JPMorgan
First Solar's "encouraging" medium-term prospects "should get even better" if the Trump Administration revokes an exemption on Section 201 tariffs for imported bi-facial solar panels as signaled on October 4, JPMorgan analyst Paul Coster tells investors in a research note. A 25% duty on these imported modules might slow "torrid" U.S. adoption generally, but it would "specifically strengthen" First Solar's position in the domestic utility-scale solar market for the next couple of years, contends the analyst. Prospects for an earnings "surge through 2020 look very good," adds Coster, who reiterates an Overweight rating on First Solar with an $82 price target.

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Neither own nor follow it.  Don't know if a run to $12 is possible.  All I know is the company has negative equity and is not cost competitive.  Since I focus on long-term fundamentals the company is out of the question for me.

 

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Thanks Klothilde for sharing. Which ones are you following? Looks like solar has been knocked down pretty hard and seem like a good point to start a position. Do you follow or own ENPH by chance? Thanks again!

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I follow FSLR, JKS, CSIQ and DQ but consider only FSLR and DQ investable.  Rest is junk.  And DQ is prohibitively expensive at the moment unfortunately.  Don't know much about the inverter industry so no idea on ENPH.  I'm aware some folks get orgasmic about that company however.

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Thanks Klothilde! I like FLSR too. JSK is a good stock to trade but hard to hold due to its volatility. Thanks again! Where’s everybody btw? 

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On 10/12/2019 at 8:24 AM, Klothilde said:

First Solar to benefit from bi-facial solar panel tariff, says JPMorgan
 Coster, who reiterates an Overweight rating on First Solar with an $82 price target.

$82 seems more than laughable, downright criminal to make such a call.  What about 7% off the highs since the bi-facial reversal?  Once again, analysts are bullish, always means sell!

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For the record, I added some today at 55.70.  Figure at some point the street will want to run this up toward 60 again.

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58 minutes ago, Mark said:

$82 seems more than laughable, downright criminal to make such a call.

How so? The company will make over $3 in the second half of this year. Then it should earn over $1 for the next few quarters. So a year from now it will have a trailing EPS of over $5 and an even better cash flow as the new factories depreciate. As efficiency improves from 17% to over 20%, cost and output will improve considerably.

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Also don't forget folks that First has $16 in net cash per share.  Deduct that from the JPM target of $82 and you are left with $66.  Relative to a $5 ttm EPS that's a PE of 13, so where's the problem?

 

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33 minutes ago, Klothilde said:

Also don't forget folks that First has $16 in net cash per share.  Deduct that from the JPM target of $82 and you are left with $66.  Relative to a $5 ttm EPS that's a PE of 13, so where's the problem?

 

The only way this gets to $82 is if not only does worldwide demand keep improving considerably (which I believe it is), but also only if all those lower tier Chinese companies go belly up to soak up that worthless supply and if FSLR decides to finally get much more geographically diversified.  Probably have to expand capacity at some point soon too.  And get a Dem POTUS, or at least not a POTUS that's gonna try and do all he can do trash renewables.  These stocks aren't loved enough to be cut any slack.  So I guess the theory on this trip back to the mid-50s or lower is they're running it down to shake out weak hands and load up for the big ride to $82?  I'll ride that ride if it happens.  Certainly a sell program has been running for several days.  

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29 minutes ago, Klothilde said:

Relative to a $5 ttm EPS that's a PE of 13, so where's the problem?

The problem is your $5 EPS is forward-looking, not backward.  Your actual TTM right now is 23 CENTS, not five dollars, so right NOW, your PE is north of 200.  THAT might qualify as a problem, at least to some.

IF your projections of those profits materialize, the stock will do fine, and will climb toward that $82 target, and probably a bit beyond.  If anything unexpected happens (and when do unexpected things NOT happen in solar-land?), and those profits do NOT materialize....

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Haha Hihi.  I think it's just funny how in the case of DQ and ENPH you take improving future earnings for granted and in the case of FSLR you refuse to even contemplate the possibility thereof.

Luckily the Q3 ER is only a few weeks away.

What will you say if FSLR posts $1+ in earnings?  Something like "Oh, what a surprise, nobody saw that coming!" ?

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I only take improving future earnings as a given for ENPH.  DQ may very well disappoint this quarter, which is why I'm not increasing my exposure to it.  (And I dang sure wouldn't put 100% of my portfolio into it!)  ENPH has had several news releases indicating they're continuing to grow their customer base, which should lead to higher and higher earnings.  (If I HAD to pick just one company in the solar space, right now that would be ENPH.)

If FSLR does as you expect, I'll tell you "congratulations"!  I'm not rooting for anyone to fail here.  I just think FSLR is no better and no worse than any other solar in terms of likelihood of growing their earnings.  They DO have the advantage of having a solid balance sheet, which should at least eliminate the possibility of bankruptcy.  But as for the future of the stock price?  Your argument appears to be that if demand increases and they get no pricing pressure from their competitors, they'll do fine.  Well, no kidding!!  So would any other solar.  That last one is a mighty big IF, though.

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3 hours ago, solarpete said:

...I just think FSLR is no better and no worse than any other solar in terms of likelihood of growing their earnings...

Hmm...  so we got:

- Sold out up to 2021
- S6 shipments going viral in H2
- S6 costs dropping like a stone
- Guidance of $3+ in H2

And still you think this isn't better than some of the junk out there?  Oh my...  I guess I'll just wait a few more weeks for your congratulations then...
 

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9 hours ago, solarpete said:

The problem is your $5 EPS is forward-looking, not backward.  Your actual TTM right now is 23 CENTS, not five dollars, so right NOW, your PE is north of 200.  THAT might qualify as a problem, at least to some.

So why don't you have a problem with ENPHs TTM PE of 240?

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13 hours ago, Klothilde said:

So why don't you have a problem with ENPHs TTM PE of 240?

Read my previous reply, and look at the earnings trajectory.  They have one serious competitor (SEDG), and they're in the process of outpacing them, with no indication from SEDG they will be able to match the improvements ENPH offers in terms of safety and reliability.  So ENPH is in the process of pulling AWAY from the competition.  FSLR's only advantage over Chinese solars is price, and with prices coming down worldwide, that advantage is set to erode, not expand.

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At current valuations, I'm not saying ENPH is the cheaper stock.  Its rise has been meteoric, and at $35 it definitely got way ahead of itself.  But I think it DOES have the better PROSPECTS.  If FSLR executes as you expect, they should do well for what?  A year?  Before competitor pricing starts to pinch them again.  Right now, ENPH HAS NO COMPETITORS, at least not on an apples-to-apples comparison.  SEDG makes string inverters, which use high-voltage DC and are not "smart".  ENPH makes microinverters, which use low-voltage AC and are "smart", and in the process of becoming smarter (a new generation is set to start shipping in Q4).  Until a competitor emerges offering THAT sort of technology, I see no end to ENPH's expansion of its market share, and therefore of its earnings.  Now of course it would have been better to invest in them when they were in the single digits, when the market was still in the "let's see what you've got" phase.  But now that they've started to prove they're for real, I doubt we'll see those prices again.  The current price is the premium you pay for now investing in a proven technology, instead of a speculative one.  And given the current wide-open path for expansion for ENPH, I think there are still plenty of juicy profits ahead.

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62.89 high on tariff day, down to 54.36 now.  Market seems to really believe the bi-facial tariff hype dished out by BS analysts!  Thinking they're more in line with Pete here. Traded it a few times on the way down, then decided to hold some.  Yet another stupid mistake.

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