Today is going to be a very interesting day for shareholders of First Solar, Inc. (NASDAQ: FSLR) and holders of any other solar energy and alternative energy players. The solar leader is set to report earnings after the close. The good news is the same as the bad news. This may set the pace and opinion of many solar stocks and many alternative energy stocks for the next few weeks.
This stock and other alternative energy stocks have seen the doublewhammy of late. First Solar has lost roughly 60% of its value fromhighs. The total malaise in the market has been hard as it is a veryhigh beta stock. First Solar is still considered a speculative companyby many, and its valuations are still very high.
First Call has estimates for the last quarter at $1.01 EPS and $339.29million in revenue. Next quarter’s estimates are at $1.23 EPS and$409.27 million in revenue, and Fiscal DEC-2009 estimates are at $6.71EPS and $2.13 billion in revenue.
If the company’s targets are just met for 2008 at $3.68 EPS and $1.21billion in revenues, First solar will trade at 32.7-times earnings and8.1-times revenues. So this is still trading at much higher multiplesthan many growth stocks, but it is no longer at levels which cannot besustained.
A real concern in the sector is the recent order trimming by a utility (unrelated to this stock directly),which could wreak havoc in the sector when many are already calling fora slowdown or supply glut into 2009 and beyond. Key stocks to watchbased upon today are SunPower Corporation (NASDAQ: SPWRA), Suntechpower Holdings (NYSE: STP), LDK Solar (NYSE: LDK), Canadian Solar Inc.(NASDAQ: CSIQ), GT Solar (NASDAQ: SOLR), and others.
Frankly, the trend of alternative energy is going to rise for at leastthe near future regardless of what oil prices do. Many key players,with First Solar in the same camp, have most of their capacitycommitted well into 2009. The trick will be if other cancellations orgearing down of orders comes into play. Many of the leaders todaystarted up when oil was at $20/barrel. But the voracity and eagernessof consumers and big businesses to go out and try to save the planetand save on energy is going to be far less if oil prices stay underhalf of the levels seen just in June.
Options still have much time value, but it looks as though optionstraders are braced for a move of roughly $20.00 in either direction. Analysts still have an average pricetarget that implies a double from current levels, which seems hard tofathom in the new lower commodity price and lower leveraged environment.
Mid-morning shares are up over 5% at $120.62. and its 52-week tradingrange is $95.32 to $317.00. Today’s report from First Solar is likely to be a critical juncture for many solar power and alternative energy stocks.
- UBS just downgraded many key solar names yesterday.
- Earlier this month, AmTech issued a favorable report as one of its top tech ideas.
- Earlier this month Goldman Sachs took estimates down for it and others.
Jon C. Ogg
October 29, 2008
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