UPDATE: "Citi Maintains a 'Hold' on First Solar (FSLR); Cutting 2010 EPS & Price Target on FX Weakness" (FSLR)"
The stock is at $105.35 +0.37 in subdued pre-market trade.
This fear is not immediate and for First Solar may not even be relevant in five years. I'm not sure Hapoalim understands the politics, the science or the company I'll explain after the jump.
From Notable Calls:
Hapoalim Securities is out with a very negative on First Solar (NASDAQ:FSLR) lowering their target price on the name to $65 (prev. $95) while reiterating their Sell rating. According to the firm, First Solar may be banned from the European market by 2015 the latest.We mentioned the then upcoming vote on RoHS last week in "First Solar may Catch a Break on European Hazardous Waste Code (FSLR; GE)":
- Based on Hapoalim's review of the updated RoHS draft documents published 12/14/09 & 1/6/10, they now believe CdTe modules have a finite life of 4-to-5.5yrs in Europe;
A new Annex (i.e., page 49 of RoHS Directive published by EU Parliament 12/14/09), has been added to the RoHS directive which specifically bans CdTe thin‐film PV panels after July 1, 2014. However, if FSLR applies for a temporary exemption extension 18 months (i.e., January 1, 2013) before the exemption expires, the commission will decided on a case-by-case basis if it will extend a grace period, which will not exceed 18 months after the expiry of the exemption.
What does this mean? Well, in short, in Hapoalim's view, this new Amendment to the RoHS directive (which did not exist before) implies the underlying technology supporting FSLR’s CdTe technology has a finite life of at least 4yrs, & at most 5.5yrs. Furthermore, adjustments to Amendment 11 added the text: “Exemptions from the prohibition for certain specific materials or components should be limited in their scope and time,” from “Exemptions from the prohibition for certain specific materials or components should be limited in their scope,” denoting that law makers in Europe are decisively looking to implement specific time limits on how long toxic materials are given a temporary pass.
Consequently, when considering: 1) the items highlighted above are public record, meaning they are not opinion, but rather suggested written European law, 2) until now, this information has gone largely unnoticed by FSLR’s RoHS risk disclosure in its 2009 10-K (see page 17 of 2009 10-K), investors, & Wall Street analysts, suggesting acute risk to FSLR’s long-term growth outlook/forward‐multiple as this information is more broadly understood, & 3) FSLR continues to make comments on l-term visibility thru 2015, implying no product viability risk, the firm believes the Street is currently factoring a 0% probability that FSLR’s modules get closed out of the European market (which represents ~80% of global solar demand, & 60%-70% of FSLR’s revs moving forward)....MORE
Notablecalls: Well, this is certainly a mess. My first instinct, after reading the Hapoalim call, was to find all the shorts available & short the heck out of First Solar as soon as possible. Yet, after some digging I'm not so sure anymore.
Consider the following:
- FSLR is down 50 pts from its April high of $152 & short interest stands around 20%+. J.P. Morgan is out this morning following their European Alt. Energy tour saing they encountered a couple of investors who remained bullish on the solar sector. In approximately 50 meetings with over 65 investors the firm only found two investors that remained bullish on the near- to mid-term investment outlook for solar energy stocks. Like J.P. Morgan, most buy side investors in Europe have a difficult time in being positive on solar PV given their expectation of significant decline in subsidies over the next two years.
It's worth noting that JPM itself remains Underweight most solar stocks, including SPWRA, WFR, FSLR, and ENER....
This could be doubly good for the Cadmium Telluride crowd (FSLR, GE's Primestar) as California had adopted the EU's Restriction of Hazardous Substances Directive pretty much wholesale....which linked to the Bloomberg story and linked back to our June '08 post "First Solar, PrimeStar Solar and Cadmium Risks (FSLR; GE)" which will lead you into as much of the science as you might care for.
On June 3 EurActive reported "Renewables win exclusion from EU toxic law".
I didn't bother to post it, the June 2 heads-up seemed enough on the subject.
Hapoalim may be correct in their reading of the law but I'm guessing it doesn't matter.
Remember the post on First Solar's Skunk Works?
Here's Reuters, April 8: Exclusive: First Solar exploring new panels in Silicon Valley
Here's Ed Gunther putting on his gumshoes back on March 10:
[Sunnyvale, California USA]
CdTe development or CIGS entry?
I started looking for the First Solar, Inc. (NASDAQ:FSLR) research outpost in Silicon Valley sometime after the defection of Solyndra Chief Scientist Markus Beck to the Chief Technologist position at the world’s number one photovoltaic (PV) and thin film module manufacturer.
Marked only by a large sign with the street name and number, the unpretentious 10000 square foot (~929 square meters) building is located on a low traffic road in an average industrial park not far from the local Lockheed Martin facility. A First Solar sign, large or small, is no where in sight.
From First Solar skunk works
A $2500 building permit was issued by the City of Sunnyvale on 09-Sep-09 enabling Evergreen Engineering to complete a “RACKS & EQUIPMENT INSTALL FOR FIRST SOLAR”. Yes, that’s the same date as Nanosolar’s mass production announcement last year. Irony?
Where the lab has no name?
Supporting the skunk works designation, the location is unlisted on the First Solar contact page unlike the project office across the San Francisco Bay in Oakland....MORE