Maybe solar demand will be far better than we expected in the first half of 2013. That's the thesis today after First Solar (NASDAQ:FSLR) released a higher than expected full-year financial target.
At a conference today, First Solar said it expects 2013 sales to be between $3.8 billion and $4.0 billion, with earnings per share of $4.00-$4.50. That's well above the $3.15 billion in sales and $3.46 per share earnings analysts had expected. When the numbers were announced, First Solar's shares shot higher and are up a whopping 48% at the time of this writing.
Drawing wild conclusions
These numbers are outstanding and they've pushed the entire industry higher today. Yingli Green Energy (NYSE: YGE) is up 19% today, Trina Solar has jumped 12%, and LDK Solar (NYSE: LDK) is up 26% on hope that this will increase sales. Yingli and LDK, in particular, are two of the most highly leveraged companies in solar -- the market is drawing the conclusion that higher sales at First Solar will be good for both, potentially leading to a profit later this year.
But let's look closer at what First Solar had to say. Of the $3.8 billion-$4.0 billion in sales, $3.6 billion is expected to be in the systems business, a business Yingli, LDK, Trina, and most other Chinese manufacturers have little exposure to, especially outside of China. I don't think we can draw the conclusion that a good year for First Solar will lead to a good quarter for Chinese solar because they have different businesses.
The real good news for First Solar
If you're a First Solar investor then the improved guidance is good, but there's even bigger news on the technology front. The company announced that it's buying TetraSun, a PV start-up which has developed a cell architecture that can generate efficiencies exceeding 21% without the added cost that normally comes with high-efficiency modules. This is a direct shot at Chinese module makers like Yingli, LDK, and Trina Solar who have been able to take share because of low cost structures.
What these companies don't do well is research new technologies to increase efficiency. That usually falls on equipment makers like GT Advanced Technologies (NASDAQ: GTAT), who provide the equipment to make solar cells. But First Solar will now be boosting its efficiency capabilities, but SunPower (NASDAQ:SPWR) is already well ahead with 21.5% efficient modules.
First Solar plans to launch this technology in the second half of 2014 and I'm sure we'll hear more details about it when first-quarter earnings are released.
First Solar changes the game
It appears that First Solar will stick with the low-cost CdTe panels, which also got an efficiency boost today, in the utility-scale business, and use TetraSun to get into commercial and residential solar. First Solar has very little exposure to these two growing markets, which has investors concerned about reliance on giant utility-scale projects.