First Solar (FSLR): A Place in the Sun

First Solar (FSLR): A Place in the Sun

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The past several years have been a roller coaster ride for clean energy investors. As we wrote about back in 2012, the solar industry passed through the valley of death due to a confluence of factors. It has now emerged from those dark days, and a new batch of solar stocks have soared far beyond reasonable value as the market experiences another boom. But there are pockets of value. In the first half of 2015, 40% of all new electrical generating capacity installed in the United States came from solar. Yet solar energy still accounts for just 1.1% of our nation’s total electricity generation. First Solar (FSLR) claims that electricity costs from its modules are on par with coal, nuclear, and natural gas combined-cycle plants in the U.S. This growing affordability of solar represents an attractive value proposition for utilities, FSLR’s primary market in the U.S. Yet installation growth rates in the U.S. will likely decrease after 2016 if Congress fails to renew solar tax credits that expire at the end of next year.

FSLR has a vertically integrated business model, both manufacturing low-cost panels and developing utility-scale solar plants. The company offers its products and services for residential, commercial, and industrial applications throughout the Americas, Asia, Australia, the Middle East, and Africa. FSLR designs and manufactures both photovoltaic (PV) thin-film solar modules, as well as high-power-density monocrystalline silicon solar modules. To date, FLSR has installed more than 10 gigawatts worldwide, making it the first thin-film PV module manufacturer in the world to achieve this milestone.

In late 2014, FSLR entered the community solar market through a strategic investment in the Clean Energy Collective to develop and market community solar offerings to residential customers and businesses directly on behalf of partner utilities. The partnership’s first four projects will introduce community solar to nearly one million potential residential users, many of whom would not be able to install solar on their own homes. There are currently around 50 community solar arrays in the U.S., and this number is expected to grow exponentially by year end.

FSLR is committed to responsible land use and minimizing impacts of PV projects across their life cycle. FSLR reported that its solar technologies have the smallest carbon footprint and the lowest lifecycle water usage on the market. The company estimates that by displacing conventional generation, its panels reduce greenhouse gas emissions and other pollutants by 89 to 98%.

PV installations have been increasing globally at an annual rate of 25% over the past two years. FSLR has identified key international markets and established offices or operating subsidiaries to grow these markets. International bookings now account for 85% of total FSLR bookings, with no region accounting for more than 25% of potential bookings.


FSLR has hands down the strongest balance sheet among its peers, including $1.2 billion in cash, supported by substantial free cash flow that can be used to invest in new technology and cost reduction initiatives. The company has a robust project pipeline that is expected to generate $1 billion in free cash flow from projects completed in North America for the two-year period ending this December.

The renewable energy landscape ten years from now will be far more advanced than it is today as additional technologies reach commercial viability. There is no guarantee that solar PV or its current leading companies will be competitive for decades to come. But FSLR has demonstrated an ability to deliver sustained product improvements and develop leading-edge technologies at lower cost than its competitors, and it is in exceptionally stable financial condition.

First Solar Inc. (FSLR)

Price: $54

Stock 52-week Low–High: $39.18 – $65.50

Market Capitalization: $5.49 billion

Earnings Per Share (EPS): $5.63

2015 est. $4.46
2016 est. $3.83

Price/Earnings (2015): 9.6x

Projected 3–5 Year Annual Earnings Growth: -5.2%

Dividend Yield: N/A

Risk: Above Average


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