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2-Star Stocks Poised to Plunge: First Solar

By Brian D. Pacampara | More Articles
December 12, 2008 | Comments (5)

Based on the aggregated intelligence of 120,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, solar power-cell maker First Solar (Nasdaq: FSLR ) has received a distressing two-star ranking. While one-star stocks have been the worst performers, our data has shown that two-star stocks still lag the market by a significant margin, and should be approached with caution. Conversely, highly-rated stocks have outperformed the S&P.

With that in mind, let's take a closer look at First Solar's business, and see what CAPS investors are saying about the stock right now.

First Solar facts

Headquarters (founded)	Tempe, Arizona (1999)
Market Cap	$9.53 billion
Industry	Electrical components and equipment
TTM Revenue	$1.01 billion
Management	CEO Michael Ahearn (since 2000) CFO Jens Meyerhoff (since 2006)
TTM Price-to-Earnings (FSLR and Industry)	34.6 and 10.6
Competitors	Evergreen Solar (Nasdaq: ESLR ) SunPower (Nasdaq: SPWRA )
CAPS members bearish on FSLR also bearish on	Research In Motion (Nasdaq: RIMM ) Amazon.com (Nasdaq: AMZN )
CAPS members bullish on FSLR also bullish on	Suntech Power (NYSE: STP ) Apple (Nasdaq: AAPL )

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 783 of the 3,3990 members who have rated First Solar -- some 23% -- believe the stock will underperform the S&P 500 going forward. These bears include CAPS All-Star srk85 and iamgreatness.

Late last month, srk85 noted that the First Solar bear case all boiled down to valuation: "While there has already been a big correction in the price, a few more years of growth at the expected levels are needed to justify current levels."

In a pitch earlier in the month, iamgreatness agrees, tapping First Solar as a classic good business-bad stock situation:

First Solar is a good company, but it is severely overpriced. They make the cheapest panels, but they haven't been generating positive free cash flow. Also, even when you discount their ttm net income (ignoring cap. ex, [depreciation], and changes in working capital) to the present you still see a big discrepancy between the value and the price. This pick might change if they start generating free cash and if the price comes down.

What do you think about First Solar, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 120,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Amazon and Apple are Motley Fool Stock Advisor picks. Suntech Power is a Rule Breakers selection. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (5) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On December 12, 2008, at 12:44 PM, pondee619 wrote:

Over on CAPS, fully 783 of the 120,000 members -- some .65% -- believe the stock will underperform the S&P 500 going forward
783 out of the "aggregated intelligence" of 120,000. Not much to even consider.
Report this Comment On December 15, 2008, at 9:08 AM, oldogartist wrote:

I think many folks forget that the rest of the World is a lot more concerned with, and has more of a sense of urgency, on creating alternative energy. One has only to go to the big solar confabs and look at the crowd makeup.Even if the Solar PV industry drops a bit from it's past 5 year growth rate of > 40% and turns in 20%, that still exceeds many other industries, and sooner or later investment $$ will flow to sectors where things are working better than others. The quarterlies will be the tell, so watch 'em..
Report this Comment On December 17, 2008, at 1:14 PM, smaulcap wrote:

Regarding the above article, I say....CAPS shmaps!
I have no position in FSLR. I am holding SPWRA. If I listened to all the negative crap I have read over the past 4 months about SPWRA, and solar in general, I would have sold my SPWRA. And, I would be one sorry puppy now. SPWRA and the solar industry are making me $$$.
Report this Comment On December 20, 2008, at 10:35 PM, burrowsx wrote:

I am a stockholder in FSLR, but I have taken out a covered option to expire in June, against a short-term downside move. Going into the Obama administration, with its commitment to solar, I expect there will be expectations running up thru Februrary or March, when the new budget is digested. When people realize the money will not be available for a year, the sector will tank, perhaps till November-December, 2009.
Report this Comment On December 29, 2008, at 9:10 AM, CastIronShore wrote:

burrowsx, right or wrong, that's an interesting line of thinking

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