2-Star Stocks Poised to Plunge: First Solar?

By Brian D. Pacampara | More Articles
September 23, 2011 | Comments (2)

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, solar module maker First Solar (Nasdaq: FSLR ) has received a distressing two-star ranking.

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, Ariz. (1999)
Market Cap	$5.8 billion
Industry	Specialized semiconductor
Trailing-12-Month Revenue	$2.5 billion
Management	CEO Robert Gillette (since October 2009) CFO Mark Widmar (since April 2011)
Return on Equity (Average, Past 3 Years)	23.8%
Cash/Debt	$464.44 million / $361.46 million
Competitors	LDK Solar (NYSE: LDK ) Suntech Power (NYSE: STP ) Yingli Energy (NYSE: YGE )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 18% of the 3,851 members who have rated First Solar believe the stock will underperform the S&P 500 going forward. These bears include All-Stars Jeffrey2012 and icrazy, both of whom are ranked in the top 15% of our community.

Earlier this month, Jeffrey2012 nicely summed up the First Solar bear case: "Declining government demand and increasing difficulty in obtaining financing for subsidized solar demand will mean harder won contracts going forward. Also, increasing supply glut will continue to hurt margins."

Currently, First Solar even trades at a P/E of 11.4. That represents a clear premium to industry peers like LDK (2.1), Suntech (3.0), and Yingli (2.1).

CAPS member icrazy expands on the underperform argument:

Solar is just not profitable. Government aid alone can't change that, at some point they will have to become profitable on their own. That will not happen until there is a massive change in the technology that will make it more cost effective. You can't continue to sell your product at half what it is costing you and still stay in business. Even with all the efforts to make conventional froms of energy cost more, it is still going to take a long time for solar to be competitive.

What do you think about First Solar, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Interested in another easy way to track First Solar? Add it to your watchlist.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (2) | Recommend This Article (0)

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 September 23, 2011, at 12:49 PM, sailrick wrote:

"Even with all the efforts to make conventional froms of energy cost more, it is still going to take a long time for solar to be competitive.
The prices for conventional (fossil) forms of energy are not the real costs.
The externalized costs are enormous and so are the subsidies.
What we do, is pretend those hidden costs don't exist, just because thay are not apparent in the price at the pump, so to speak.
"According to a March 2011 story by the Christian Science Monitor, gas and oil interests receive a steep $41 billion per year in subsidies. Also, according to a July 2010 article in the New York Times?, the fossil fuel industry at-large benefits from tens of billions of dollars in government subsidies on an annual basis."
from GetEnergySmartNow dot com 9/15/11
global fossil-fuel subsidies = more than US $412 billion in 2009.
Report this Comment On September 26, 2011, at 9:05 PM, bparting wrote:

It is true that fossil fuels are heavily subsidised an have been since the 1960s.
However I think the more appropriate arguement here is that First Solar is the leader of develolping market. It may be true that they arent yet as efficient as oil or coal but they do represent an important alternative and an industry that does make money. Elimination of some competition will be good for the survivors and rebalance demand and supply, improve margins again and allow for more time to mature the business.
I welcome thoughtful and rational debate on this. However I do think most of the posters on this are hysterical and simplistic in their arguements. And I mean on both sides.
My thinking is that its a tough period, but their excellent value to be had here if youre willing to spend the time doing due dilligence on the books , pick your timing and being patient.

Add your comment.

Compare Brokers

Fool Disclosure

DocumentId: 1558285, ~/Articles/ArticleHandler.aspx, 5/26/2012 3:31:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 18 hours ago Sponsored by:
	DOW	12,454.83	-74.92	-0.60%
	S&P 500	1,317.82	-2.86	-0.22%
	NASD	2,837.53	-1.85	-0.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes