First Solar, Inc.: Why FSLR Stock Just Fell Off the Cliff
Will First Solar Stock Find a Ray of Hope?
Clean energy stocks are still coming to terms with the harsh reality that the newly elected U.S. president is more fond of oil and gas than renewable energy.
To top this, First Solar, Inc. (NASDAQ:FSLR) has announced that the election result is likely to crush whatever little optimism had surrounded solar energy stocks. FSLR stock has already lost 50% year-to-date as compared to the S&P 500, which gained almost nine percent in the same period.
In its guidance call on Thursday, First Solar, Inc. announced the acceleration of its “Series 6” solar module production to 2018, phasing out its “Series 4” product. Consequently, its “Series 5” product was cancelled. (Source: “First Solar, Inc. Announces Acceleration of Series 6 Solar Module Production To 2018,” First Solar, Inc., November 16, 2016.)
The 2016 restructuring and asset impairment charges are estimated at $500.0 million to $700.0 million, and First Solar, Inc. now projects a loss of $4.00 to $2.00 per share for the year. The company will also reduce its workforce at its manufacturing facilities in the U.S. and abroad. (Source: Ibid.)
First Solar stock was down about 12% in pre-market trading and is likely to cross the 52-week low of $30.85.
The company has been hit hard by declining demand from China. First Solar management has cut their 2020 solar target in China in the light of expected lower demand in the country. Moreover, as the company makes the transition from Series 4 to Series 6 production, the 2017 production is expected to fall to 2.2 gigawatts.
FSLR stock has already lost about 39% over the past year, as compared to over eight percent gains posted by the S&P 500 index.
CEO Mark R. Widmar is confident that the transition to Series 6 modules will enable the company to maximize the intrinsic cost advantage of the new thin-film technology.
There are a number of headwinds for solar stocks at present, and the situation is unlikely to improve in the near term for the sector as a whole. To overcome the current challenges, Tesla Motors Inc (NASDAQ:TSLA) had proposed the acquisition of SolarCity Corp (NASDAQ:SCTY). Today, all eyes will be on the shareholders’ vote for the Tesla Motors-SolarCity deal as Tesla makes the transition to a sustainable energy company.
Moreover, Donald Trump’s criticism of China in his election campaign has led to the possibility of lower trade opportunities with China, which does not bode well for solar stocks, especially First Solar stock.
The coming years will be a transition period for First Solar, Inc. As the sector waits for more clarity on the Trump administration’s policies, including on subsidies for clean technology, tax incentives, and trade policies with China, FSLR stock is likely to remain subdued.