First Solar Stock Forecast

Oct 09, 2019

Originally posted on https://financhill.com/blog/investing/first-solar-stock-forecast

First Solar Stock Forecast: Concerns about climate change are just one of the reasons individuals and businesses are switching to solar power.

Solar power is a truly renewable energy source, and advanced technology has made installing and maintaining appropriate panels more affordable than ever. Users enjoy reductions in energy costs, and some even see energy rebates when their panels generate excess power.

Harnessing solar energy offers smart solutions to some of the world’s most complex problems. In areas with limited access to power infrastructure, solar energy can generate heat, distill drinking water, and power connections to medical equipment, online resources, and other lifesaving tools.

The newest solar energy technology promises to make solar panels easier and more effective. For example, transparent solar energy panels are being incorporated into structures as windows. Researchers are continuing to develop and refine solar panels, making them smaller and more efficient with each new generation.

In the first quarter of 2019, 2.7 GW of new solar PV capacity were installed – more than any single preceding quarter. With this addition, the nation reached 67 GW of total installed capacity, which can power approximately 12.7 million homes. Year over year, US PV capacity has increased by 10 percent, and that amount is projected to double by 2024.

Investors know that solar energy has extraordinary growth potential, but the big question is which company is most likely to dominate future markets? First Solar is a popular choice, but can it keep up with the competition over time?

First Solar Business Model

First Solar [NASDAQ: FSLR] is widely considered an industry leader in solar energy technology. It’s innovative thin film PV technology has roughly half the carbon footprint of traditional crystalline silicon PV models.

More importantly, it displaces between 89 and 98 percent of greenhouse gas emissions when applied in lieu of conventional energy generation methods.

The company invests a substantial amount in research and development, resulting in some of the most efficient solar technology available. For example, First Solar systems have markedly low energy payback. This refers to the length of time the system must operate to recoup the energy necessary to produce it.

First Solar [NASDAQ: FSLR] is also focused on water conservation, and the systems do not require any water to generate electricity during system operation. Overall, the company has reduced water used in the manufacturing process by almost 30 percent since 2009.

These features are particularly important in areas of the world that lack basic infrastructure, and First Solar partners with NGOs in the Americas, Africa, the Middle East, and Asia to maximize its global impact.

Is First Solar a Buy?

Generally speaking, First Solar’s financials have been solid. Sales are increasing steadily, with a total of $585 million for the quarter ending June 30, 2019.

This represents an increase of $53 million quarter-over-quarter, which is attributed to increased sales in the United States and Australia.

For the same quarter, First Solar reported losses of $(.18) per share, but this isn’t exactly bad news. Previous quarter losses were $(.64) per share.

First Solar [NASDAQ: FSLR] continues to prioritize R&D, which has resulted in the successful release of its Series 6 systems. However, the R&D investments have reduced cash, restricted cash, and marketable securities from $2.3 billion to $2.1 billion.

This doesn’t appear to concern analysts, who are more focused on the popularity of the Series 6. First Solar had record module production and shipments during the quarter ending June 30, 2019, and there is no indication of slowed demand.

The Series 6 is sold out through the remainder of 2019 and all of 2020, and there are already orders coming in for 2021.

Based on the company’s position as an industry leader and its seemingly unstoppable growth, most analysts have rated First Solar a strong buy.

What are the Risks of Buying First Solar?

No industry can promise a risk-free investment, and First Solar [NASDAQ: FSLR] has the same challenges as others in the renewable energy space. One of the most difficult to overcome is the relentless opposition from the fossil fuel industry.

These organizations place intense pressure on US lawmakers to limit the expansion of solar power. They have had some success in getting legislation passed to protect their interests, which has an impact on companies specializing in solar energy, like First Solar. However, many political leaders agree that the solar is the future of energy production, so this may not be a long-term issue.

The on-going trade war between the US and China has also taken a toll on solar technology companies. Many components – and some finished products – are manufactured in China and Taiwan.

Increased tariffs have caused ups and downs in solar companies’ profitability. It is currently unclear when these particular economic conditions will even out.

A lesser-known but significant risk of investing in solar energy is the need for rare metals in solar panel production. Manufacturers must have a steady supply of tellurium, which is one of the rarest elements on Earth.

For now, the risk isn’t related to the amount available for mining. It is more about where the mines are located. Today, China mines 93 percent of the world’s rare earth elements, so a disruption in supply from China could be devastating for the solar industry.

Finally, in an economy marked by low unemployment, many industries are struggling to find qualified workers. The solar industry is struggling more than most. There simply aren’t enough candidates with the required skillset, and there aren’t enough training programs available to meet demand.