First Solar Stock Could Soar in 2016
Despite widespread bearishness on solar energy stocks, First Solar, Inc. (NASDAQ:FSLR) could have a breakout year in 2016. There are plenty of reasons why First Solar stock will rise, but first, let’s review what’s weighed on FSLR stock lately.
In what’s been a horrific year for the solar industry, First Solar stock rose 4.78%. By comparison, rivals like SolarCity Corporation (NASDAQ:SCTY) lost 51.96% in market cap during the same time period. So in some sense, 2015 was already a pretty good year for FSLR stock.
Other than that silver lining, this has been a pretty bad year. Considering how quickly the solar industry was growing, FSLR stock could have been significantly higher by now had the industry continued its upward trend.
Before, companies like First Solar were scaling up their operations to meet growing demand. As a result of industry expansion, solar panels got cheaper to both manufacture and buy. First Solar looked to be unstoppable.
But then oil prices crashed and for some unearthly reason, it dragged the solar industry down as well. Oil is a fuel for transportation, whereas solar energy is mainly geared toward residential and commercial building use. The two energy resources barely overlap, but First Solar took a hit nonetheless.
What’s happening here and where is FSLR stock headed in 2016?
FSLR Stock Could Be Poised for Massive Gains
After taking a good look at its business, I’m really optimistic about First Solar stock in 2016. Solar stocks come in all shapes and sizes, meaning they get revenues from different sources and face different business challenges.
That’s why the market is treating First Solar differently than SolarCity. SolarCity may be a well-known brand that’s backed by Elon Musk, but its operations are dramatically different compared to First Solar’s. Sure, both firms are in the business of generating electricity through solar panels, but that’s where the similarities end. The two business models differ enormously and personally, I think the scales are tipped in favor of First Solar.
Why? Because SolarCity is focused on installing rooftop solar panels, primarily added to houses and business buildings, but First Solar builds power plants that supply solar energy to the grid; this is a huge strength for FSLR stock.
First Solar signs contracts with wholesale buyers, like utility companies, which lends some stability to the company’s stock. We can reasonably be assured that the value of FSLR stock will be insulated from downturns because it’s selling to other businesses. (Source: “First Solar Fact Sheet,” First Solar, Inc. web site, last accessed November 13, 2015.)
On the other hand, SolarCity stock is dependent on public perception of solar energy. If people perceive that installing solar panels is expensive, or they don’t want to take on the perceived risk, then SCTY stock is going to get pummeled.
The Best Alternative Energy Bet: First Solar Stock
By providing utility companies with solar energy, FSLR stock is stealthily moving into the territory occupied by traditional energy firms. It’s a seamless integration to the existing energy infrastructure, one that will subtly shift us toward alternative fuels.
First Solar stock is my first choice for the solar industry, because it’s found the perfect balance of disruption. Groundbreaking technology can sometimes be ahead of its time and overly ambitious ideas can sometimes miss the mark. Rooftop solar is a wonderful concept, but look how vulnerable it was to a downturn. FSLR stock, by contrast, is rock solid.