Tuesday, May 3, 2011

Declining First Solar Setting Up for a Trend Reversal With Today's Earnings Report (FSLR)

The stock is down a further $3.20 at $134.33.
It has been weak since the tsunami-run-up to $161 as the realization sunk in that Japan would not be covering every square inch of the islands with solar panels.
Here's a seven month chart, chosen to show the late October gap:

The recent chart pattern is the mirror image of the action over the last twelve or so reporting periods where the stock advanced into earnings and fell afterwards. This is a major change.
My expectation is for an unimpressive first quarter and strong guidance.
A bottom somewhere between here and that December base would set up a thirty point move in a flat overall market or relative strength in a declining one.
(as a mentor once said "You can't eat relative performance" meaning a loss is a loss even if it is smaller than your benchmark)
Here's some reading material until the close, from AltEnergyStocks:

The Cadmium Telluride Solar Factory Race
Solar manufacturers are racing to build the next cadmium telluride (CdTe) photovoltaic (PV) factory in the United States. Three major CdTe on glass factories in the US have been recently announced each with a unique starting point. Abound Solar has won a US DOE loan to support a new 640 MW/yr facility in Tipton, Indiana. General Electric (GE) recently announced buying Primestar. They indicate that they will be building the largest PV manufacturing facility in the world. Finally First Solar has announced a 250 MW/yr facility to be built in Mesa City Arizona near Phoenix.  Let’s take a closer look to see which one of these factories might have the best advantage to be in the lead to generate revenue.

First Solar
As the largest manufacture of PV modules in the world, First Solar Inc (FSLR) is the defending champion.

First Solar has produced so many factories, it almost seems like their real product is factories, not solar panels. They indicate a total manufacturing capacity of 1.5 GW/yr (that is gigawatts per year) at the end of 2010. They have plants in Perrysburg, Ohio, Frankfurt/Oder, Germany, and Kulim, Malaysia. They plan to increase manufacturing to 2.9 GW/yr including additional facilities in Vietnam and the United States by the end of 2012. They are well capitalized, and will finally be manufacturing in Arizona with a 250 MW/yr factory, where the corporate headquarters is located. Don't blame First Solar on the long delay to manufacture in Arizona. Arizona has a backwards micro-economic energy policy. They import their fuel while exporting their dollars. With the 3,739 MW Palo Verde nuclear power plant dominating the electrical generating landscape of the state, solar energy has been a hard sell even with all that sun. The CdTe technology is very appropriate for the hot Arizona climate because of First Solar’s advantageous temperature coefficient in comparison to crystalline silicon PV technology. While Arizona has been debating solar for the last ten years, First Solar was building factories all over the world. This new facility is expected to take one year to build. Can Abound or GE build a factory and create markets faster?...MORE