Avoid This Solar Stock

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Company First Solar (Nasdaq: FSLR  )
Submitted By: TSIF
Member Rating: 99.94
Submitted On: 10/13/2011
Stock Price at Underperform Recommendation: $57.64

Polypore International Profile

Star Rating **
Headquarters Tempe, Arizona
Industry Solar
Market Cap $4.42 billion
Industry Peers ReneSola (NYSE: SOL  )
Yingli Green Energy (NYSE: YGE  )
JinkoSolar (NYSE: JKS  )

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

This week's pitch:

I've been pitching many Solar stocks up, (although I'm mostly losing) as they enter uncharted fresh bottoms territory. I think [LDK Solar (NYSE: LDK  ) ], [JA Solar (Nasdaq: JASO  ) ], and a few others have some potential at the low levels, or at least the risk mitigated somewhat.

First Solar, however, has been so loved by analysts that while it's valuation in the mid-$50's is reasonably "fair", it's valued at 5 to 6X its China based peers. While investments in China have some risks [because of] transparency and government intervention, China has been propping up its solar industry while the US [lets its] decay. US Analysts have been propping up the US Solars even though they can't compete on cost. They can compete somewhat on a service basis, but selling panels short and making some back on the service/installation is a limited business model.

Overall, I think Solar, subsidies or not, is starting to catch on. I see solar panels sprouting on many rooftop, in grid arrays, and on construction signs. Overall, however, the competition is fierce and while US loyalty may help, it's all about the pricing at this point.

[In\ this case, both fundamentally, and certainly technically First Solar, even at 70% off [its 52-week] high, has more to shed. The demand needs to meet capacity and until it does, the lower priced players have the edge. Revenue YoY is down over 35% and income by 65%. Breakeven isn't far away.

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The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. 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 don't 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 (7) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On October 21, 2011, at 12:06 AM, spakklal wrote:

    I think your observation regarding Solar Stocks is very poor. None of the Chinese Companies you mentioned do not have a research center. I believe First Solar has a superior and cheaper product than any other manufacturer. First Solar is the only Company who has more than 10 billion dollars worth of Projects in the US and they have orders from all over the world. Some of the Solar Bashers are trying to bring down the US Solar Industry. But I hope they will not be successful.

  • Report this Comment On October 21, 2011, at 12:59 AM, Steven676 wrote:

    Your article is so misguided. First Solar may be headquartered in the U.S., but that is irrelevant. Not long ago only 10% of their business was in the US. Most of their production capacity is in Germany, Malaysia and Vietnam.

    The title of your article is about First Solar but then you mainly talk about US solar companies in general. That's like saying that Apple isn't going to do well because many other American phone manufacturers aren't doing well.

    So let me get this straight, you prefer JASO and LDK, given the following EPS's from last quarter?

    According to Yahoo Finance:

    LDK -$0.62

    JASO -$0.22

    FSLR +$0.70

    Oh and btw, why do you bother to mention that you are seeing solar panels sprout up in various places? Why would investors go off of anecdotal evidence in an article rather than actual numbers?

    Furthermore, your article is too short to be of value. It's like a tweet as far as articles are concerned.

  • Report this Comment On October 21, 2011, at 1:03 AM, Steven676 wrote:

    Oh, and where did you get your numbers for YoY revenue? According to Google Finance the numbers are 587 and 532, which doesn't represent a 35% decline as stated in your article.

  • Report this Comment On October 21, 2011, at 2:13 AM, VietnamVet1 wrote:

    Question for spakkial: Exactly who are these "Solar Bashers" ?

  • Report this Comment On October 21, 2011, at 9:13 AM, earthunit wrote:

    THIS is as poorly a written article as you will ever see. USELESS!

  • Report this Comment On October 21, 2011, at 2:26 PM, sailrick wrote:

    @VietnamVet1

    "Question for spakkial: Exactly who are these "Solar Bashers" ?"

    Answer: The Republican party. This is the science free zone party that denies global warming almost unanimously, while the world scientific community is nearly unanimous in agreeing on AGW.

    Some of the most outspoken and scientifically illiterate congressmen, when it comes to climate change, are leading the charge on the Solyndra issue. Fred Upton for example, who says there can be no global warming because God won't allow it.

    These congressmen are carrying on a witch hunt against honest scientists, while using the Solyndra case to paint all renewable energy as a bad idea. They are completely in the pockets of big oil and coal, and will do anything do discredit renewable energy.

    90% of coal industry political donations go to Republicans

    80% of oil industry political donations go to Republicans.

    They are making a huge deal out of Solyndra, complaining about "crony capitalism" while being engaged in crony capitalism involving the fossil fuel industry, that has been going on for about 100 years.

  • Report this Comment On October 26, 2011, at 9:03 PM, oldogartist wrote:

    It may not be the best way to say the solar market is growing from a factual standpoint, but there are enough published PV installed data reports to show that the 30% year over year growth rate is indeed still happening.

    We do have a serious perception problem here and some fairly biased half truth reports coming from the 'street' ... and it's still not that solar costs too much, it's that coal is too cheap ... unfortunately many electric utilities bought into coal mining over theyears, spun them off, yet still make added profits off the coal the utility buys and charges to the end customer. A feed in tariff in the US could get solar on every new roof and many many existing ... coal will scream bloody mrder ... and nowhere to be found along with the electrics when they start raising the seawalls nationwide in 100 years ... or sooner, and the bill needs to be paid ....

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