Almost all the analysts covering the stock have an indirect hidden agenda. Many big investment banks were involved with the underwriting of the IPO and FSLR is a client to their investment bank. It feels as though, the big banks have thrown millions upon billions into the stock (and they are holding firm), while these short term fluctuations are just the day/swing traders exchanging each others money.
Since they don't use Poly Silicone (there is an apparent shortage) and instead use other materials such as cadmium Telluride- this has been a play on this niche market. FSLR can produce materials much cheaper, although you rarely see discussion about how much less efficient it is. So realistically from a business 101 perspective, if you can purchase a solar panel for 100 dollars that has an efficiency of 10%, or purchase a solar panel for 200 dollars that has an efficiency of 25%, you would opt for the more expensive panel.
Most of these Analysts seem to be very generous and do not like to compare these facts with other Solar Companies- but just compare on a COST basis. But of course all of this is just rhetorical, it's obvious that FSLR (due to massive funding) has the clear advantage over any Thin Film solar company. However, their margins should be on the decline as large players like Sharp are in the process of building similar Thin Film factories as we speak.
And on one more note, FSLR uses natural resources instead of the Poly Silicon. I've read rumors that the Cadium Telluride they use in their panels is a very rare element found on earth, so in the relatively long term they could be in trouble.
Summary:
07' They turned a profit and raised guidance EPS. Mainly due to a 37 million dollar differed tax and the effective currency effects. It was a great play in a niche market, investment banks and hedge funds had a field day. However, with the the ability to declare Capital Gains in 2008, perhaps some of these banks will be selling. Especially since FSLR will actually be faced with new competition.
With all this said, I opened a short position yesterday at 248. I will remain vigilent as shorting a momentum play is quite dangerous, but I feel at these price levels the risk to reward, especially with prevailing economic conditions will be in favor.
Cheers.
Subscribe to:
Post Comments (Atom)
3 comments:
you clearly don't understand the fundamentals of the solar industry. you are confusing the efficiency (amount of energy produced per area) with the watts (amount of power per module). cost per efficiency isn't a meaningful benchmark unless you have very limited space for the panels (a small roof or a satellite for example). the most important metrics are $/watt and installed $/watt. i don't care how efficient my panels are, i just care how much power i can get for the cheapest price. using that metric, First Solar is half the cost of any other manufacturer out there. FSLR is currently selling panels for $2.29/watt. the current industry average price is $4.83/watt according to SolarBuzz.com. grid parity is about $1.25/watt (the price that equates to the unsubsidized average delivered cost of grid electricity), or about $0.08-0.10 per kWh. FSLR publicly projects they will reach this metric by 2012, but they have a history of beating all their benchmarks, so i wouldn't be surprised if they get there by 2010.
the thing is they won't stop there, they will keep improving. by 2015, they could easily be producing electricity for half the cost of coal electricity! especially if there is a carbon cap or tax. plus the cost of coal keeps going up!
they are already growing as fast as they can ramp up new factories. they basically have no real competitors and will very soon have almost infinite demand for their products. you do the math. next time please do some due diligence before you post on an industry you don't understand.
underdog, I agree to some extent, but since the market is forward looking- you might want to add:
Poly Silicone has been in a shortage, due to many suppliers and only a few manufactures.
As WFR (and others) ramp up production on Poly Silicone next year, that $4.83 (by the way FSLR pumps solarbuzz.com on their website) will drop enormously. These companies won't be extracting natural resources.
In the long run, a material you can manufacture will always be cheaper than a natural resource? Unless you somehow beg to differ on that.
FSLR, in my humble opinion, would be a better play if they weren't a MIDDLE MAN. If they had some type of patent on their technology and they had a market capitalization rate more on par with their growth projections.
The reason I write my blog is to make money. FSLR looks, smells and feels like a bubble stock.
*The CEO garnered more proceeds (from shareholders) then the company had in Net Income. The STOCK is a great investment, but the COMPANY is going to have one hell of a time meeting these evaluations. Priced to perfection.
However as a disclaimer: In the near future this might have a better shot of running to 350.
But we know either way it's going to be volatile so some vertical credit spreads and maybe some longer term OTM puts, or selling some OTM calls would be the BEST way to play this.
kevin,
i totally agree with you that in the long run, silicon cells may be cheaper than CdTe. sand is rather abundant on this planet. there has been very little reliable public information on the true global availability of tellurium. up until now, it just wasn't in demand, so no one has done much looking for the stuff, other than as a byproduct of copper mining. as a side note, tellurium is often found in coal deposits, so it might (pure speculation) be reasonable to extract it from the emissions of coal power plants. or the inside players might know of resources that the public isn't aware of. who knows.
but while i think silicon cells *might* be cheaper than CdTe in 10 years or so, i seriously don't think they will in the next 5 years. there are way more unknowns in the silicon supply/demand equations than for FSLR at this point. who knows how many of the recently announced polysilicon manufactures will start producing on schedule. or if demand drops for solar, how many of the silicon solar producers can compete at a lower cost point.
the next 5 years give an advantage to CdTe. after that it could go either way. but wall street isn't forward thinking enough to factor in 5 years from now.
i agree that the current valuation for FSLR is priced to perfection. but i got in at $30 so i'm ok riding out the ups and downs.
Post a Comment