Thursday, May 26, 2011

First Solar: Short Squeeze Being Set Up (FSLR)

In light pre-market action the stock is down 7 cents at $120.55.
I've got no dog in this fight.
As of the last report there were 17,496,566 shares sold short, up from the prior fortnight's 15,635,466. That's the highest I can remember.
These little factoids came up because of Jim Chanos' comments on FSLR yesterday:
"Jim Chanos Trashes Solar Energy as ‘Hot Air’" (FSLR)
This is the third time Chanos has gone public with his opinion, the prior two being:
May 4, 2011 
First Solar Analyst Roundup: Auriga, Brigantine, Cowen, Chanos (FSLR)
April 14, 2011
"Jim Chanos (!) Spanks First Solar (!) FSLR)"
The interesting thing, to me anyway, is that there is nothing new in his observations, and one possible error.
He brought up the sales by insiders, this has been going on since the stock was over $300 three years ago and has actually decreased since Ahearn left as CEO to lobby as Chairman.

We addressed departure of Bruce Sohn in the April 14 post and brought up a possibility worse than Chanos'.

Regarding the technology, FSLR can squeeze some more efficiencies out of the current CdTe, enough they say to reach grid parity, at least in the American Southwest, within 2 1/2 years.
For more on where they might be headed we had a bunch of posts from last year:
UPDATED: First Solar Looks to CIGS Technology (FSLR)
UPDATED: "First Solar News, Rumors: CIGS, Mercury, Tellurium" (FSLR; ASOE; TSL; STP; JASO )

A Pivotal Year For Thin-Film Solar Companies (FSLR; GE)
Solar: Get on Board the CIGS Love Train (FSLR; ASTI; DSTI) Miasole; Nanosolar 

"Metrics for Thin Film Solar CIGS Company Comparisons" (FSLR; ASTI; DSTI) Miasole; Nanosolar
Watch Out First Solar: "GE outlines R&D efforts with CdTe thin-film technology" (FSLR; GE)
Was Solyndra the Reason Goldman Sachs Threw First Solar Under the Bus? (FSLR; GS; SPWRA) Goldman Sachs and the Solar Land Rush (FSLR; GS)

and more recently:
First Solar Shopping for a Private CIGS Company? (FSLR)

We've been following this stuff for a while.
The biggest negative is the fact that FSLR will have no free cash flow this year, they are plowing everything and more back into expansion.

So what might be a catalyst for a squeeze?
Watch for accumulation, volume increases on up days.
That will be Goldman or their clients.
And then look for a reiteration of the Goldman buy rec.
January 24
UPDATED: Aha! "Goldman Sachs added First Solar to its Conviction Buy List" (FSLR)
February 2 
First Solar: Goldman Sachs Suggests Selling Covered Strangles (FSLR)
May 4 
UPDATED--First Solar: Goldman Sachs Maintains Buy, $190 Target, Morgan Stanley 'More Constructuve' (FSLR)