I don't really think anyone truly knows where the bottom is in the solar sector -- least of all the solar companies themselves.
Austerity measures throughout much of Europe and tumbling solar panel prices are wreaking havoc on solar companies' bottom lines from small to large. Once profitable companies like JA Solar (Nasdaq: JASO), Trina Solar (NYSE: TSL), and LDK Solar (NYSE: LDK) have all gone from expecting hefty profits in 2012 just three months ago to expecting steep losses instead. Being heavily reliant on subsidies and government spending to encourage the conversion to solar power is coming back to bite this sector in the behind, and everyone is feeling it -- just ask the shareholders of First Solar (Nasdaq: FSLR).
Less than a year ago, a share of First Solar would have run you as much as $175. Now, the stock is having trouble holding onto the $30 mark following another absolutely atrocious earnings update. The world's biggest producer of thin-film panels reduced fourth-quarter revenue guidance to between $2.8 billion and $2.9 billion from its previous guidance of $3.0 billion to $3.3 billion, citing the "weather and other factors" as the reason for the shortfall.
What's really a stark smack in the face is how quickly 2012's estimates have come down. According to Yahoo! Finance, the analysts following First Solar had been expecting a median estimate of $10.95 in EPS just 90 days ago. Based on the company's own guidance last week of $3.75 to $4.25 in EPS, it's apparent that no one really has a damn clue how bad things are -- even the companies themselves.
Want even more encouraging news if you're a bull (note ... you're about to be drowned in sarcasm)? Despite the stock's precipitous decline, insiders haven't made a single purchase, yet they have sold more than 3.4 million shares in 54 separate open-market transactions. And all this time I thought the captain was supposed to go down with the ship! Don't forget that just two months ago, former CEO, Rob Gillette and the company split on what I'd deem less-than-amicable terms.
Until the solar sector proves otherwise, I simply don't see how you can trust any estimates from specific solar companies -- especially First Solar. Based on the rate of decline, I even question whether the company will remain operationally profitable by the midpoint of 2012. I've made my bet in my CAPS portfolio that First Solar will underperform the market going forward, and I don't anticipate needing to cover that bet until First Solar finds itself in the high single-digits.
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