Wednesday, November 7, 2007

First Solar (FSLR) Impressive Results

Have to give credit to First Solar (FSLR) - some impressive results tonight. Since they do not require polysilicon for production they have been buffeted from the shortages in the industry. Tonight they reported $159M in revenue and $0.49 EPS ($0.58 was reported but $0.09 was tax benefit). Considering they were only supposed to make $0.19 for the quarter (on $120M in revenue) and $0.64 for the entire year - that would qualify as a blowout result.

I mentioned I left 12% on the table by not pulling the trigger in the mid $140s since I was wary of the 100x FORWARD estimates. Well with the stock up 15% in after hours and approaching $200, I left more than 12% on the table (in 3 days).

This company is very hard to figure out a valuation on since its growing so fast and this profit came in way ahead of estimates. A slew of upgrades and higher estimates will be coming tomorrow. Analysts had pegged only $1.42 in estimates for 2008, but again this quarter alone they did nearly $0.50. So I am going to assume 2008 is going to look closer to $2.50? $3.00? (hard to tell).

Even at $3.00 2008 estimates which is double what analysts say, this stock is now priced in after hours at 65x forward estimates for 2008. Again, impossible to quantify where it belongs or what its earnings potential is next year. However, the ability to avoid the polysilicon shortage has proven to be a big advantage thus far in its public life. I will have to re-evaluate my position on First Solar (FSLR) after this type of result... I clearly missed the First Solar story.

I am a big solar bull (yes it's real, unlike ethanol), but do think the stocks (as a whole) have run ahead of themselves... this result will light a fire under the whole sector even though all the other companies are part of the polysilicon shortage chain and hence have real issues despite rapid revenue growth. First Solar has been immune to that; Sunpower (SPWR) showed the reality for the rest of the sector as its more comparable - great revenue growth, compressing margins and tougher to generate profits. That won't matter though with sentiment sure to roar off of FSLR's results.

No position

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