This Could Send FSLR Shares Soaring in 2016
The under-promise and over-deliver strategy worked quite well for First Solar, Inc. (NASDAQ:FSLR) stock last year. While many solar stocks ended 2015 deep in the red, FSLR stock climbed an impressive 48% from $44.60 to $65.99.
There is a good reason for First Solar’s bull run last year. In three out of the past four quarters, the company beat Wall Street’s earnings estimates by over 100%! (Source: “Analyst Estimates,” Yahoo! Finance, last accessed April 6, 2016.)
However, the momentum in FSLR stock did not continue into 2016. Year-to-date, the stock slipped 4.9%. Does that mean the good times are over for the company?
You see, the big disappointment was that during a presentation, the company did not provide any estimates for 2017 earnings. Nevertheless, First Solar is still a solid company.
As a utility-scale solar installer, the company’s growth in the past several years has been nothing less than phenomenal. Production has surged from 1.6 gigawatts (GW) in 2013 to 1.8 GW in 2014, and then to 2.5 GW in 2015. This year, First Solar’s production is expected to reach 3.1 GW. (Source: “Manufacturing Update,” First Solar, Inc., April 5, 2016.)
Efficiency has also been improving. From 13.4% in 2013, First Solar’s average efficiency increased to 14.0% in 2014 and 15.6% in 2015. The company predicts that its average efficiency will increase to 16.4% in 2016.
On the technology front, First Solar is set to introduce medium voltage DC (MVDC) plant architecture in the near future. There are quite a few benefits to MVDC. For example, it requires fewer components and less wiring while increasing plant efficiency. First Solar plans to start a commercial pilot of MVDC in 2017 and officially launch the product in 2018. (Source: “Technology Update,” First Solar, Inc., April 5, 2016.)
Financially, FSLR stock is more than solid. Today, many solar companies have huge piles of debt, but First Solar actually has a positive net cash position. When other players in the solar industry are struggling to keep up with their interest payments, First Solar could be getting $16.0 million in net interest income. For 2016, the company expects net cash to be in the range of $1.9 billion to $2.2 billion. (Source: “Finance Update,” First Solar, Inc., April 5, 2016.)
And let’s be honest, not having guidance is not really the end of the world. The company’s CEO Jim Hughes said, “We have a lot of moving pieces heading into 2017,” and that revenue recognition rules would lead to “very lumpy results.” (Source: “First Solar Delays 2017 Guidance on Choppy Revenue Recognition,” Bloomberg, April 5, 2016.)
First Solar’s solid performance has been noticed by Wall Street. Most recently, Goldman Sachs Group Inc. (NYSE:GS) reiterated its “Buy” rating on FSLR stock with a price target of $100.00. That would imply a more than 60% upside in the company. (Source: “First Solar Company Profile,” MarketBeat, last accessed April 6, 2016.)
The Bottom Line on FSLR Stock
There you have it: FSLR stock might not look that attractive right now, but given some time, its strong fundamentals could prove the bears wrong again.