First Solar (FSLR) “CramersPosse” Sam Young Mike Kaufman Andrew Ticzon Chris Botros
Company Profile • Solar Module Producer • Founded in 1999 • Began commercial production in 2002 • IPO in 2006 • Largest market cap ($16.13 B) of solar companies • Offices in USA, Germany, and Malaysia • Headquarters in Phoenix, AZ • Lowest production costs among current thin film technology • Long term contracts with major solar product developers through 2012 • 795.2% total return in stock price for 2007
Product • Specializes in producing solar panels to be sold to large scale solar power plants • Each module 2x4 feet • 70 watt average per module • Photovoltaic (PV) Thin Film Technology • Able to convert energy more efficiently than traditional direct bandwidth semiconductors • 10.5 % average module conversion efficiency (average around 15-16%) • Use cadium telluride as semiconductor material • Polysilicion in short supply • From by products of mining (zinc and copper) • Abundance of cadium telluride allows FSLR to be able to meet production demand increase in sales • Finished product in 2 hours
Solar Industry • Many solar companies, including FSLR, fall under the ‘Semi-Conductor specialized’ industry • Thin layer of semiconductor film • Does not apply to all solar companies • The industry is not too large; total market cap of $71B. • FSLR has been established for a long period of time and has been producing more efficient solar devices.
Solar Industry Growth • The Solar Industry has been outgrowing the rest of the market. • In the last year alone the large cap solar companies have grown an average of 367%, relative to the rest of the market which has dropped an average of about 3%.
Why Solar Industry Growth? • Many industries are interested in solar energy and other forms of renewable energy because it can cut a large amount of overhead costs. • For some companies, solar energy companies can be the key to a brighter future. • For this reason even companies experiencing a loss desire to buy solar products.
Competition • Competition mainly from semiconductor companies (i.e. Sunpower/Cypress) who do not specialize only in solar module production • Solar cell production companies have drastically smaller market caps due to production/sales in specific regions • Much more speculative, less stable • Many smaller, private firms that either produce on a smaller scale or buy solar cells for power plants
Double Bottoms are a strong buy indicator signaling a bounce off resistance. • Resistance in turquoise, support in pink • MA’s = support and resistance • Fibonacci trends • Exhaustion gap • Look at history • Look at earnings calendar • Other technical indicators (RSI and MACD) • Liquid stock (volume) Buy Signal
No areas of negativity because identifiable trends • Areas of support/resistance • Fibonacci trends relevant • Technical indicators only important with short term range • Historical patterns (industry information) are helpful in determining short term future price
Strengths • Experience • Founder has been part of several business ventures since the 1940s • Develop own production processes=> lowest production costs per watt in industry • Competitive advantages kept “in-house” • Early mover advantage? • Elastic demand • Economies of scale • Learning by doing
Weaknesses • Solar power has its drawbacks • Challenging to store • Geography/climate factor • Production process involves cadmium, which can be toxic • Externalities?
Opportunities • People and firms always need energy • Shift toward clean energy, as environmental concerns increase • High growth potential if trend continues • Energy from fossil fuels can become more expensive over time, since there is a limited supply of fossil fuels=> alternative energy becomes more attractive
Threats • Competition from other alternative energy sources, and from nuclear power • Could leave solar power “in the dust” • “Greenward” shift may lose momentum
Recommendation Recommendation: Buy • …but be willing to hold for at least one year Rationale: First Solar stands out in its industry because of its competitive advantages. Also, the solar industry is expected to continue growing strongly over the next few years. However, such growth prospects do not guarantee short-run stock appreciation.