July 30, 2009

Why is First Solar included in the ERRI fund?

Posted in economic indicator, economic recovery, ERRI, Obama administration, U.S. Economy tagged , , , , , at 6:35 pm by realitytax

Tempe, Arizona based First Solar, Inc. (FSLR) designs and manufactures solar modules using a thin film semiconductor technology. The 2′ x 4′ (60cm x 120 cm) modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into an average rated power of approximately 73 watts (a single-junction polycrystalline thin film structure that uses cadmium telluride as the absorption layer and cadmium sulfide as the window.) First Solar provides a variety of integrated services to its customers: solar power system design, procurement of permits and balance of system components, construction management, monitoring and maintenance.

Beginning in 2009, First Solar is expanding its focus from sustainable commercial solutions into the Residential Market. In a forward-looking, eco-sensitive “cradle to grave” model, First Solar finances and manages the collection & recycling of Photo-voltaic First Solar Modules.

FSLR shares fell from a little over $300 in late July of 2008 to just over $85 in November of that year as the reality of the credit and mortgage crisis had sunk in, and share prices were again low in March when much of the market struggled. Investor sentiment is typically positive when the 50-day moving average is rising, especially if it’s also above the 200-day moving average. With that in mind, the 200-day numbers have trended down since October 2008, when the more volatile 50-day average had “crossed below.” The 50-day emerged above the 200-day in late May. Other technical indicators, such as the Chart pattern, complete a “mixed” outlook (arguably neutral or slightly better) as you might expect for a company reliant on the still-reeling building industry. Earnings for the 2nd Quarter are due out today.

With $14.6 billion in market capitalization (a Mid-Cap stock) First Solar valuation tumbled during the latter months of 2008, tracking the broader markets as global reverberations of what started out as a problem in the U.S mortgage lending industry spread throughout the world stock markets. FSLR is used within the ERRI fund to represent alternative energy. The market recovery can’t be measured solely by tracking retail clothing, the financial sector, and old-style energy companies/utilities; mid-cap companies in the alternative energy business face a competitive landscape as their customers weather the credit crunch, but clearly there is growing sentiment in favor of wind and solar power generation.

Despite a glut in the supply of solar panels world-wide, First Solar recently announced a venture to build France’s largest solar panel manufacturing plant, with an initial annual capacity of more than 100MWp. This new venture will support the recently announced goal of the French government to become a leader in sustainable energy technologies. The plant is projected to employ over 300 people during the second half of 2011. FSLR valuation will reflect investor confidence in solar and alternative energy production versus reliance on fossil-fuel/carbon-based sources, given the current U.S. administrations focus on “greening” up the economy and the energy sector.


Disclaimer: Readers are advised that the ideas, materials, and opinions contained herein should be used solely for informational purposes. The author does not purport to tell or suggest investment securities that should be bought or sold. Investors should always conduct their own research and due diligence and obtain professional advice before making any investment decision. Neither the author nor realitytax shall be be liable for any loss or damage caused by a reader’s reliance on information obtained in any posts, newsletters, special reports, email correspondence, or comments on the web site. The author is not a registered investment advisor or broker/dealer. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase (or sale) of securities. Opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty is made as to their accuracy or completeness, and we are not liable for errors or omissions. All such information should be independently verified with the companies mentioned. The author(s) receives no compensation of any kind from any companies that may be mentioned on this web site. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed; the intent is neither to suggest investment choices/strategies nor to influence market conditions, but rather to divulge methodology for inclusion of equities and sectors in the Economic Recovery Reality Index [ERRI]

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2 Comments »

  1. realitytax said,

    [31-July-2009]

    LOS ANGELES (Reuters) – Shares of First Solar Inc slid 10 percent and dragged down the rest of the solar sector Friday, a day after the industry bellwether posted a quarterly profit that pummeled Wall Street estimates but said it would resort to rebates to defend its market position in Germany.

    The stock fell $18.09 to $155.46 in afternoon trading on the Nasdaq. Shares of U.S. rival Sunpower Corp were down 4.25 percent at $32.03, while top Chinese solar company Suntech Power slid 4.6 percent to $18.38.

    Evergreen Solar Inc, which reported a wider-than-expected quarterly loss on Thursday, fell 12.6 percent to $2.08.

    Credit Suisse analyst Satya Kumar downgraded First Solar to “neutral” from “outperform,” saying the current quarter would “be the last good quarter for a while … we expect the stock to look ahead of this peaking earnings momentum and pull back to lower levels.”

    Other analysts, including from Barclays Capital, Jefferies & Co and UBS, lowered their price targets for Tempe, Arizona-based First Solar’s stock.

    Caris & Co downgraded Evergreen to an “average” rating, saying price erosion was taking a toll on profitability.

    The solar power industry has suffered this year as the global credit crisis has dried up available financing for renewable energy projects and a pullback in government subsidies in Spain and Germany has made demand fall. That slump has created a global glut in the supply of solar panels, which has sent prices tumbling and hurt producers’ profits.

    Read the rest of the story: http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE56U5J120090731
    Full coverage of the credit crisis: http://www.reuters.com/news/globalcoverage/creditcrisis


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