First Solar, Inc.'s (NASDAQ:FSLR) stock has been hit by the COVID-19 pandemic like most of the market, falling 37.5% so far this year. That's quite a bit worse than the S&P 500's 21.3% drop. But this solar stock may not be affected nearly as much as most companies. 

Management recently said that it's planning to keep manufacturing operations in Ohio, Malaysia, and Vietnam operational unless government restrictions change. Combined with the net cash balance of $1.8 billion on the balance sheet, First Solar is set up to not only weather the current storm but thrive when it's over. 

Large solar installation in the desert.

Image source: First Solar.

Manufacturing keeps going

If manufacturing plants keep running at full steam, then it's conceivable that First Solar's 2020 results won't be too far out of line with current guidance. As of Feb. 20, 2020, management expected $2.7 billion to $2.9 billion in revenue this year, earnings of $3.25 to $3.75 per share, and a net cash balance of $1.3 billion to $1.5 billion to end the year. 

There will be projects that get delayed or lose financing, but First Solar is supplying utility-scale developers, so I wouldn't expect too much disruption given the essential nature of electricity production. And that should keep the cash coming in even as much of the world shuts down due to COVID-19. 

A balance sheet to envy

I mentioned that net cash at the end of 2019 was $1.8 billion, and management expected net cash to be $1.3 billion to $1.5 billion at the end of 2020. That's an incredible cash hoard for a company with about $3 billion in sales and less than $400 million per year in operating expenses. 

Cash won't cure everything during the current crisis, but it'll give a big buffer to keep the company afloat. First Solar can absorb short-term pain better than most of its competitors, and that might be its biggest advantage over renewable energy rivals long-term. 

Options for First Solar

The combination of operations continuing and the balance sheet strength give First Solar a lot of options over the next year. It could just weather the storm and come out the other side stronger than most competitors. Or it could put some of that money to work to acquire competitors to round out its product lineup. 

Over the past decade, First Solar has seen gross margin eaten away by crystalline silicon-based competitors, and companies like Canadian Solar (NASDAQ:CSIQ) and JinkoSolar (NYSE:JKS) now have better margins. They could be acquisition targets with market caps of $905 million and $665 million respectively. 

FSLR Gross Profit Margin (Annual) Chart

FSLR Gross Profit Margin (Annual) data by YCharts

First Solar could also buy adjacent products like a utility-scale tracker company or an inverter manufacturer. With stocks dropping like a rock, now may be the time First Solar takes advantage and starts buying companies to drive future growth. 

A lot to like

Keeping First Solar's manufacturing operations running will be an incremental positive because it keeps money flowing into the business. But the big advantage First Solar has is the net cash balance of $1.8 billion and the flexibility that that provides. The money can help the company ride out this storm and even allow for opportunistic acquisitions if the right deal comes along. 

The one caution is that solar panel sales will likely be extremely competitive in 2020 if developers rationalize their plans and competitors dump products in the market. And that could hurt bookings and margins. There were signs of some weakness already in 2019 with 1.7 gigawatts of bookings being "de-booked" -- largely because of the financial distress of customers. That stress could be getting worse right now. 

As solar investors look at an uncertain future, I think First Solar is sitting on the most valuable business in the industry. The balance sheet is the single biggest reason why, and it's a strength that no other company can match.