Wednesday, February 13, 2008

First Solar (FSLR) Out With Another Great Set of Earnings

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Following up on last quarter's blowout earnings [Nov 7 - First Solar (FSLR) Impressive Numbers] is yet another set of great earnings from First Solar (FSLR), and raised guidance. While this is pushing up the entire sector, First Solar is its own unique animal in that it is isolated away from the polysilicon shortage issues - but solar investors cannot be bothered with facts like that.

More appropriate as a guidepost for the rest of the sector (which does rely on polysilicon) will be this Friday's report from Yingli Green Energy (YGE). While the move up today in First Solar (+20%) is impressive, keep in mind the stock peaked at $200 yesterday before dropping late in the day, so it is essentially retracing all of yesterday's intraday loss plus another 5%. Either way, the stock report is very good and the company continues to hit on all cylinders. My one concern was a comment last quarter about 1st half 2008 being at par with 2nd half of 2007, which the company confirmed today. However, relieved investors again don't care about minor details like that. But this would assume relatively flattish growth for the next 2 quarters, which for a high multiple stock is not the best medicine. It will be interesting to see what the reaction will be once the euphoria wears off, since investors are so short sighted nowadays. While the full year 2008 numbers are fantastic, the 1st half 2008 will be a slowdown from previously unsustainable patterns of growth. Which will matter to investors?

My guess is for aggressive investors a strategy of shorting this gap up (once euphoria fades) will actually work quite well as people come to the realization that 1st half 2008 won't replicate current growth rates. I can't do that here in this environment, but just saying...
  • First Solar Inc (FSLR), maker of thin-film solar equipment, said on Wednesday its fourth-quarter earnings jumped as it ramped up production of renewable electricity modules.
  • Net income for the quarter climbed to $62.9 million, or 77 cents per share, from $8 million, or 12 cents per share, a year earlier. Analysts had on average expected the company to post earnings of 54 cents per share, according to Reuters Estimates.
  • Net sales in the quarter rose to $201 million from $53 million a year earlier; analysts had been looking for about $180.2 million.
  • The Phoenix-based company said it decreased its manufacturing cost per watt by 12 percent from the year-ago quarter to $1.12 per watt.
  • First Solar Inc (FSLR.O: Quote, Profile, Research) said on Wednesday it expects to sell between 400 and 430 megawatts of its thin film solar modules in 2008 and post revenues of between $900 million and $950 million. (analysts currently at $820M)
  • First Solar Chief Financial Officer Jens Meyerhoff told a conference call that revenues in the first half of 2008 would lag the 2007 revenues during the same period.
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