Why First Solar Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of First Solar (Nasdaq: FSLR  ) jumped 21% today after the company said unexpected demand in Europe has caused the company to delay a plant closing.

So what: The plant in Frankfurt, Germany, was supposed to close in October but unexpectedly high demand for solar modules in Europe has compelled the company to delay the closing by about three months. The demand likely comes from delays in feed-in tariff rate cuts as well as a number of other suppliers filing for bankruptcy or insolvency over the past year.

Now what: This is something of a dead cat bounce because First Solar still expects to close the plant, and for demand to fall, but it is a short-term positive. I've said before that there is value in First Solar's shares, the market just doesn't appear to be pricing in any good news, or even the value of the underlying business. I'm not very hopeful the rally will last, but would look for other manufacturers to also see a bump in demand and benefit from the trends First Solar is seeing.

Interested in more info on First Solar? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (7) | Recommend This Article (0)

Comments from our Foolish Readers

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  • Report this Comment On June 12, 2012, at 3:28 PM, PRODOD wrote:

    FSLR disclosed an INVENTORY BUILD over Q1 &Q2 of about $400 Million. Why should we bid up the stock on an email "comment" that there is "excess demand" in Germany? If the financials say that FSLR is drowning in panels, why would we trade on what seem to be inconsistent "comments"? Has anyone asked FSLR to comment on this --- How can you assert "excess demand" when your financials say that your inventory has exploded? Did FSLR sell $500 Million of panels in the first two weeks of Q3 ... ask some questions for once ... jeeze...!

  • Report this Comment On June 12, 2012, at 4:02 PM, Siro wrote:

    Unexpected demand in Europe? Have you missed this?:

    "First Solar Gets Aussie Projects" on a blog, or, "First Solar up 21%, one day after Australia deal" from (MarketWatch).

  • Report this Comment On June 12, 2012, at 4:28 PM, PRODOD wrote:

    The 'Aussie Projects' were yesterday's news and --although certainly positive-- will add nothing to the financial 'bottom line' until 2014. It is also worth noting that the prospective Australian 'solar farm' is 100% dependent on Australian subsidy and therefore not an indication of progress under FSLR's new (restructured) business plan goal of contracts which are not subsidized.

  • Report this Comment On June 12, 2012, at 7:02 PM, BottomCaller wrote:

    Prodod.... You answered your own question in your question. Yes. They have burned thru the inventory at a good pace and orders keep coming in. Note to industry analysts.... I dont think the inventory overhang is as big as you estimate. The swing shift is in play and booking remain strong. Giddyup!!!

  • Report this Comment On June 12, 2012, at 7:03 PM, BottomCaller wrote:

    Please... Everyone keep saying the rally wont last. When you believe in it, that is when it will reverse.

  • Report this Comment On June 12, 2012, at 7:11 PM, BottomCaller wrote:

    Travis. When is someone going to write about what you see 6 to 9 months out. That is what the market is trading on. If this is only an indication that fslr has more orders than it thought it would 3 months ago, it shows some investors that thought fslr was not going to even survive the glut need to reevaluate the possibility that fslr will survive the glut and the company will be prosperous in the coming years.

  • Report this Comment On June 12, 2012, at 8:22 PM, PRODOD wrote:

    BottomCaller - I'm using FSLR's own numbers from the 10Q's for the inventory build & no indication that recent sales are taking up the slack (the 'Aussie Project' will not even begin construction until 2014 and FSLR has not landed any similar contracts in recent months). Moreover, the industry wide measure of excess inventory is estimated to be at least 12 months of demand. But, hey, good luck with your "Giddyup" analysis ... if you get QE3, even FSLR might stand a chance.

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