First Solar is under a cloud and the future is not bright after a recent solar conference was short on excitement and long on worries.
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FSLR - First Solar - Company Profile
First Solar, Inc. provides solar energy solutions in the United States and internationally. It operates through two segments, Components and Systems. The Components segment designs, manufactures, and sells solar modules that convert sunlight into electricity. This segment manufactures cadmium telluride and crystalline silicon modules for system integrators and operators. The Systems segment provides turn-key photovoltaic solar power systems or solar solutions, such as project development; engineering, procurement, and construction; and operating and maintenance services to utilities, independent power producers, and commercial and industrial companies. Company description from FinViz.com.
For Q2, FSLR reported earnings of 87 cents that beat estimates for 58 cents. Revenue of $934 million beat estimates for $904 million. However their GAAP earnings declined 86 cents to 13 cents after the company decided to halt production os solar panels using TetraSun's experimental technology. The company guided to full year earnings from $4.10-$4.50 to $3.65-$3.90 per share.
Goldman Sachs warned the solar sector was facing demand risk as government regulation and new laws made solar systems less desirable. The supply continues to be higher than demand and that is forcing the average selling price lower. Jinko Solar and Trina Solar are increasing production 18% this year. Utility companies are becoming less agreeable about buying back power that systems push into the grid during daylight hours. Goldman expects hardware costs to decline 20-30 cents per watt in early 2017. They are currently averaging 42 cents a watt and First Solar's production cost is 42 cents. As prices continue lower, FSLR will lose more money. They are not the only one. Trina's cost is 45 cents a watt.
Earnings Oct 27th.
JP Morgan said First Solar will struggle to hit earnings estimates in the near term. JMP cut FSLR to an underperform. Deutsche Bank cut them from buy to hold.
Shares have fallen from $39 to $34 but the trend is still lower. Monday's close was a three-year low.
Buy Nov $32.50 put, currently $1.78, no initial stop loss.