First Solar Stock on Target for Sustained Breakout

SustainedDon’t Count First Solar Stock Out, as Future Looks Bright

One of the worst-performing sectors since 2008 has been the solar space, but there could be some hope going forward for long-established solar plays like First Solar, Inc. (NASDAQ:FSLR).

Solar companies were the toast of Wall Street back in 2008, but have undergone a dramatic collapse since then. We have seen many companies disappear under extreme debt loads, including SunEdison Inc (OTCMKTS:SUNEQ), which fueled its aggressive growth via massive debt. The company filed for Chapter 11 bankruptcy protection.

A look at the chart of the Guggenheim Solar ETF (NYSEARCA:TAN) shows the brutality of the situation over the past several years. The ETF has experienced a massive deterioration since trading at $307.90 in 2008 and $51.00 in March 2014, but there are some signs of life, as the ETF is up 14.3% this year.

tan

Advertisement

Chart courtesy of StockCharts.com

After years of restructuring, we are essentially left with the strongest solar plays, such as First Solar stock.

First Solar is a global company with about 18 years of operations. Its proprietary thin-film semiconductor technology used to produce low-cost solar power solutions is highly regarded.

FSLR stock traded at a whopping $317.00 in 2008 and, just like the sector, it has been a disastrous downward slide, but there is some hope, as the stock is up 17% this year.

I’m not saying FSLR stock could trade back to $317.00. The reality is that the price level was driven higher by irrational exuberance. It is not worth anything close to that price.

fslr

Chart courtesy of StockCharts.com

In the best-case scenario, a move back to the $50.00 level for FSLR stock would be a great start and, if everything pans out, a target of $75.00 achieved two years ago would be great.

My Bull Case for FSLR Stock

First Solar has over $2.0 billion in cash after cleaning up its balance sheet. The risk of financial default that took out other solar plays is not relevant with First Solar stock.

The mid-cap solar company has time to execute its strategy through controlled growth, and not simply wanting to expand without any regard for debt.

Some may argue that the area of renewable energy is under threat with President Donald Trump, due to his previous denial of climate change and his desire to focus on fossil fuels and coal, but the reality is the solar sector will likely continue to be important in the world scheme.

While there may be a pause under Trump, the world continues to move toward a greener environment and solar will be a critical part.

The fact is that there are over seven billion inhabitants on this planet, not simply the 340 million in the United States. Renewable energy is here to stay, and companies like First Solar will likely continue to play a critical role in its growth, which could translate into better days ahead for FSLR stock.