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What's Going On at First Solar?

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The last 24 hours have been less like a roller coaster and more like a power tower for shares of First Solar (Nasdaq: FSLR  ) . The stock crashed 25% yesterday on news that the company's CEO was out and have roared back 14% this morning after the company released earnings.

What in the world is going on?

The fall of Rob Gillette
The stock first tumbled yesterday when First Solar announced that Rob Gillette was out as CEO and would be replaced on a temporary basis by former CEO Michael Ahern. But did he quit? Was he fired? No one seems to know (although I'm betting he got the ax).

Losing a CEO is a big deal if you're talking about Steve Jobs or Michael Dell, but Gillette hasn't exactly been a standout, so the reaction was a bit wild to observers.

What drove the massive move was an underlying concern that executives are abandoning ship before things get really bad for First Solar.

Earnings make the world go round
The shocker this morning was that First Solar decided to release third quarter results more than a week ahead of time. Net sales were $1 billion in the third quarter, earnings per share were $2.25, and cash level remained strong at $795 million.

What we were really waiting for was an updated guidance, and I'll say it's mixed. For 2011, First Solar expects sales to be $3.0 billion to $3.3 billion and earnings per share of $6.50 to $7.50. The company is also planning to cut capital spending and invest more in market development, sales, and R&D.

At the bottom end of that earnings guidance, shares are trading at a 7.5 times 2011 earnings, but the problem is, they're headed in the wrong direction. A month ago, I contemplated whether or not First Solar was becoming obsolete as costs for manufacturers like Trina Solar (NYSE: TSL  ) , JA Solar (Nasdaq: JASO  ) , and Yingli Green Energy (NYSE: YGE  ) continue to fall. Chinese competitors fighting for survival and dumping product at almost any price are eating up First Solar's cost lead.

To buy or not to buy? That is the question
Now the question becomes whether or not First Solar is so cheap it's become a screaming buy, or a disaster in the making?

I'm a shareholder and won't be selling today, but I have a hard time being very bullish on First Solar. SunPower (Nasdaq: SPWRA  ) (Nasdaq: SPWRB  ) has done a lot to cut into the company's cost lead, and as polysilicon prices plummet, everyone but First Solar becomes more competitive with the grid. That isn't likely to change unless First Solar can come up with a technology revolution.

Then First Solar might become a screaming buy again.

Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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 Motley Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (10)

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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 Report this Comment icon found on every comment.

  • Report this Comment On October 26, 2011, at 8:51 PM, ayaghsizian wrote:

    This was my biggest loss of the year. Thought I was getting a good deal at $95.

    FSLR may or may not be a good deal but either way there are other investments with much clearer 2012 estimates and no foreseeable problems. I do hope some shareholders make some money back, but it will probably be in the long term when earnings are more reliable.

  • Report this Comment On October 27, 2011, at 11:40 AM, Brettze wrote:

    If memory serves me right, higher oil prices will bring the shine back to solar stocks... Higher oil prices will come back PRIMARILY because we still do very little about diversifying America's energy portfolio.. Do we really need subsidies to help solar stocks ? Sure but not as much as you would like to see.. Big Oil get relatively small subsidies for its size , just mere billons against trillons in sales.. You have to be silly to expect to get subsidy for every solar watt... Our solar energy industry can use a little help from Uncle Sam. We have no other choice but to go ahead and install solar farms all over the hot deserts to help reduce our excessive appetite for fossil fuels as well as keep our air cleaner.. Ban on burn permits for farmers and ranchers will help a lot, too. We have to understand that our air is much dirtier than our drinking water... So , there , you dumped solar stocks, duh? First Solar is still growing no matter what you bet... First Solar will still come up with higher efficiency solar panels approaching 14% by 2015 from 11% now which is an excellent boost.. First Solar's solar panels generates electricity more steadily and longer during the day than other higher efficient solar panels like Sunpower's or those Chinese variety.. Overall, First Solar is the most efficient solar panel maker in the real world installations. Overhead clouds?? no problem for First Solar... Big headache for other solar brands.. Relax, First Solar investors, you will get all the money back .. Wall Street is just under occupation right now..

  • Report this Comment On October 27, 2011, at 11:44 AM, Brettze wrote:

    I dont care very much about solar panels but this is all we have got right now.. Sure, there is much superior solar energy technologies coming but they appears to remain stuck in the laboratories too long for my own liking.. I think it has a lot to do with giving our beloved oil & gas industry adequate warnings to get out of the way. Our oil and gas industry will gradually fade out of the picture in the future.. No questoin about it... like wax candles and kersone streetlights of yesteryear.. Cars with V8 engines will be gone in the bydays... Advanced powertrains will boost fuel mileage way up in the future... I already invented something different about hybrid cars .. it is workable.. Hey, they got their jobs to protect and I can understand this...

  • Report this Comment On October 27, 2011, at 11:51 AM, Brettze wrote:

    Every one of you readers got to look out in the sky especially from certain vantage of points where you can clearly see the heavy smog hanging over the populated areas.. It is so sickening.. Yet, you refuse to dump oil stocks and stuff.. I recently wrote to Air Resources Board explaining a possible major cause of the smog and I have yet to hear from them.. It is an embrassing oversight on behalf of our Smog Check stations... It is a smog part that is often neglected .. I proposed that that smog part be given more attention.. and kept maintained.. Air pollution is still neglected while politicians are more focused with clean water issues which is good.. Clean air is every bit as important but politicians are not auto mechanics .. Our auto mechanics dont care about that damn smog part , they ignore them... This is understandable because nobody understands the huge impacts on our daily health from this simple oversight occuring at all smog check stations everyday... Air pollution is a corruption, simple as that..

  • Report this Comment On October 27, 2011, at 11:52 AM, Brettze wrote:

    I understand human nature or humanities... Heck, I still crunk people around whether they like or not... This is my call.

  • Report this Comment On October 27, 2011, at 11:59 AM, Brettze wrote:

    First Solar is a one trick pony stock.. There is so many various solar energy technologies abound .. So far no new IPOs ..yet... Most of the new solar technologies will require aluminium.. It is a question of higher aluminium prices that can hurt Warren Buffet's holdings in Coca Coal as you know they come in aluminium cans... Warren Buffet are destroying kids' teeth with high fructose syrup found in Coca Colas... General Electric need cheap aluminium to make gas turbine blades to boost its profits... Boeing for its jet airplanes.. There is car engines made of aluminium now.. Car wheels... The long list goes on which higher aluminium prices can hurt the bottom lines.. No wonder, we dont want more solar energy because aluminium will be in big demand ... We cannot make up our minds.. So you see why aluminium prices is still down depressed! I thought that we want jobs.. Maybe nobody want to work with alumiium if he can help it.. I dont know really. I am puzzled, quite frankly... Aluminjium prices are way too low at $1 a pound,, yet analysts keep saying that it is high.. China proudces 8 times as much aluminium as we do here in US of A.. maybe this is where jobs are... You sure you dont want aluminium ?? Crazy!!

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