Thursday, November 18, 2010

UPDATED: "First Solar News, Rumors: CIGS, Mercury, Tellurium" (FSLR; ASOE; TSL; STP; JASO )

Update: "Credit Suisse's Solar Commentary (FSLR; SOL: STP; TSL)"
Original post:
In yesterday's "First Solar Seems Headed for 200-day Moving Average on Credit Suisse Downgrade, Germany, Cramer (FSLR)" I commented:
The 200-day is currently $126.89. In early pre-market action the stock is down another $1.71 at $128.98....
...I take Cramer's comments to mean the stock is near an immediate-term low. Probable bounce within 24 hours...
It looks like we'll get the bounce. After trading as low as $122.51 on Wednesday the stock closed at $122.83, down another $7.86 in what has turned out to be a tough week for the longs.
This morning the stock is changing hands at $124.95 up $2.12 in early pre-market action.

The comment on Cramer was simply a reflection of the fact that by the time something hits his radar the move is usually well under way, he's a busy guy. All bets are off for any kind of technical analysis right now, for those who care, long or short, you'll just have to listen to what the stock is telling you.

Another reason for our bounce call was "Rejoice Longs: First Solar Still the Most Shorted Stock in the S&P 500 (FSLR)". When a stock is getting spanked the short interest can be a clue as to the buying that can be expected when the herd changes direction.
At yesterday's low we were down 20% from the late September highs, it seemed like a reasonable spot for a prognosticator to stick his neck out.

I had promised to follow up on the Credit Suisse call, here's some of the commentary.
Forbes had a quick hit:
Cold Water For Corning, First Solar
This morning, Credit Suisse downgraded shares of First Solar from outperform to neutral as oversupply across the industry remains a concern. With the downgrade, Credit Suisse lowered its price target from $155 per share down to $127.50....
Next is Eric Rosenbaum at, one of the better journalists covering the sector:

 Solar Losers: Credit Suisse Call Sends Sector Slipping
Credit Suisse has downgraded the entire solar sector from an overweight to a market weight, and solar shares are feeling the pinch on Wednesday morning.

The headline of the CS note said it all: "Strong supply growth appears set to overwhelm demand trends."
The biggest losers in early trading were GT Solar(SOLR) and JA Solar(JASO).Credit Suisse specifically downgraded GT Solar to a hold, in addition to the sector call.

Suntech Power(STP) was also at the top of the losers roll in solar on Wednesday morning, but that was also specific to its earnings miss.

Solar shares have been selling off over the past two weeks after a very healthy months-long rally. Earnings beats from solar companies and bullish guidance about 2011 have not resulted in another leg to the sector rally. Now, with the Eurozone debt fears once again in the headlines and the euro dropping by 7 cents in the past week to a level it hadn't seen since late September, pressure on solar shares is coming from several angles.  
Demand keeping up with capacity expansions of 50% has been the big question ahead of 2011. Credit Suisse, notably, was the first to call the optimistic demand scenario for 2010, when pessimism was reigning in solar. Its 12 GW call for solar demand in 2010, which turned out to be conservative, sparked a rally in shares.

"From a cyclical standpoint, we are unable to reconcile the supply growth with our still optimistic demand expectations, and hence we think there has to be a period of stock weakness," Credit Suisse analyst Satya Kumar wrote on Wednesday morning....MORE
Barron's Eric Savitz wrote at Tech Trader Daily:

Solar: Credit Suisse Turns Cautious; Sees Supply Glut Ahead
The solar stocks are coming under selling pressure this morning after Credit Suisse analyst Satya Kumar turned cautious on the sector, cutting his ratings on multiple stocks, on concerns about an expected dramatic increase in supply, which he thinks will lead to renewed pressure on pricing.

Kumar writes in a research note that he fears that more subdued demand growth in the solar market can’t keep up with incremental supply coming online starting in mid-2011. He says new capacity is coming online at a rate of 2 GW/month in the fourth quarter. In 2011, he sees “flattish demand,” while capacity is expected to increase 50% next year at the top 20 producers - and entrants are also on the way. “As a result, factory utilization should start falling,” he writes, “and pricing could decline faster than expected.”...MORE
Finally the Greentech piece I stole the headline from:

First Solar must keep the momentum in efficiency improvements and cost reduction
First the news...
Apollo Solar Energy (OTC: ASOE), a vertically integrated miner, refiner and producer of high purity tellurium (Te), announced a five-year purchase contract between Apollo Solar Energy and a major worldwide solar panel manufacturer.  According to an 8-K filing, that panel manufacturer is First Solar.
According to the contract, Apollo will provide 5N ultra-high purity tellurium, the core material of cadmium telluride (CdTe) thin-film solar photovoltaic panels, with a projected value of $110 million over five years.  We've looked at issues surrounding First Solar's tellurium supply here.
First Solar's panels are being used at the 16-megawatt Blue Wing installation in Texas. Mr. Kanellos reported on the firm's capacity expansion to 2.7 gigawatts here.  We covered their deal with SolarCity and Walmart here and their third quarter earnings here.
And now on to the rumors:
First Solar needs to keep the momentum in its relentless march to higher efficiencies and lower costs. That could mean new materials and new processes.  Here are some ways we've heard that they are working on it:
  • In one of Silicon Valley's poorest kept solar secrets, First Solar has established a CIGS skunk works.  We've learned that the head count of that operation is in the range of 80 people and that the firm is starting to solidify its CIGS process.  Markus Beck left his role as Chief Scientist at CIGS aspirant, Solyndra, to join First Solar in January of last year, as reported by Michael Kanellos.  If the firm could arrive at a high-efficiency CIGS process that would drop into its existing copy-smart lines -- the First Solar CdTe efficiency levels might get a jump start from their current 11.3 percent. The rate of improvement in efficiency levels seems to be slowing down significantly....MORE
We have a couple hundred posts on First Solar, use the search blog box, keyword FSLR.
More on the stock and the sector later today.