Since Poly Silicone is still low on supply and this problem probably won't be fixed until next year- when WFR and others ramp up the production. FSLR will still have a competitive advantage. Wall Street saw this advantage and exploited it.
This stock on that basis alone still has some room to run. The company on the other hand will have hefty expectations to live up to. 20 billion in one year- is quite a bold statement- especially when the CEO will make almost as much money(from shareholders) than the company will make from their business. Thank you pre-planned stock options- allowed on the basis of material non-public information.
So here is my DISCLAIMER to all:
*Due to the momentum, in the near future this might have a better shot of running to 350 then 100.
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 might be the BEST way to play this on the short side. The premiums for in the money are rather lofty.
Best of luck.
Also if the technicals give away to S&P and we end up in a full blown recession. These momentum plays will be hit the hardest: MOS, DRYS, any solar stock (FSLR). Also some good shorts IMO AZO, AKAM, lastly CAH.
Saturday, December 15, 2007
Tuesday, December 11, 2007
First Solar to Mars? or The Junk Yard?
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.
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.
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