After the U.S. presidential election, renewable energy stocks—particularly solar stocks—suddenly received more investor attention.
To give you an idea, the MAC Global Solar Energy Stock Index has surged 23.2% since November 4. It substantially outperformed the already impressive rally in major market indices like the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite during this period. (Source: “MAC Global Solar Energy Stock Index,” MAC Solar Index, last accessed December 14, 2020.)
And if you believe in the future of the solar energy industry, there’s one company that simply cannot be ignored: First Solar, Inc. (NASDAQ:FSLR).
First Solar is a solar panel manufacturer headquartered in Tempe, AZ. The company has been around for more than 20 years and has become a leading global provider of comprehensive photovoltaic (PV) solar energy solutions.
Its current offerings include the manufacture and sale of PV solar modules; the development, construction, and sale of PV solar power systems; and operations and maintenance services.
One of the reasons solar stocks are getting a lot of attention these days is the prospect of having a Democrat in the White House. But here’s where FLSR stock stands out: even under the current Republican administration, it’s able to deliver stellar growth rates.
Just take a look at the company’s latest earnings report.
In the third quarter of 2020, First Solar generated $927.6 million in net sales. That represented a 44.4% increase quarter-over-quarter and a whopping 69.6% increase year-over-year. Growth was driven by international project sales and a higher volume of modules sold to third parties. (Source: “First Solar, Inc. Announces Third Quarter 2020 Financial Results,” First Solar, Inc., October 27, 2020.)
The business also became more lucrative. In the third quarter, First Solar’s gross profit margin came in at 31.6%, marking a substantial expansion from the 25.3% reported for the year-ago period.
The real highlight, though, was on the bottom line. In the September quarter, the company generated net income of $1.45 per share, which was five times the $0.29 per share it earned for the year-ago period.
However you look at it, this solar company has been firing on all cylinders.
Of course, for many industries, the third quarter of 2020 was largely viewed as a recovery period from the impact of the COVID-19 pandemic—so growth was not uncommon.
However, it’s worth noting that, even during the second quarter—when numerous businesses were deep in the doldrums—First Solar, Inc. was still expanding.
In particular, the company’s second-quarter 2020 net sales totaled $642.4 million, which was nearly 10% higher than what it earned in the second quarter of 2019.
The resilience in the business, combined with growth, has made First Solar stock a hot commodity this year.
First Solar, Inc. (NASDAQ:FSLR) Stock Chart
Take a look at the chart below. For nearly eight years, FSLR stock was in a trading range.
The range was a wide one, but every time the stock tried to advance above the $78.00 mark, it was met with resistance. Thanks to the strong rally started in April 2020, though, First Solar stock was able to surge past that resistance.
Even though that move was followed by a brief dip into the trading range, First Solar managed to climb back up and break out of it. Most recently, the stock has been consolidating above its previous resistance level.
Chart courtesy of StockCharts.com
Because the pandemic has not ended and there are macroeconomic uncertainties, a lot of companies decided not to issue any forward guidance. First Solar, however, has reinstated its financial outlook.
In particular, management expects the solar company to generate net sales between $540.0 and $790.0 million and earnings between $1.00 and $1.50 per share in the fourth quarter of 2020. (Source: “Investor Overview,” First Solar, Inc., October 27, 2020.)
Last but certainly not least, First Solar has a rock-solid balance sheet. At the end of September, the company had $1.7 billion in cash, restricted cash, and marketable securities, plus a net cash position of $1.4 billion.
The solar industry will likely enjoy strong tailwinds going forward. According to the U.S. Energy Information Administration (EIA), the installed PV capacity is expected to double globally over the next five years. (Source: Ibid.)
First Solar, Inc. is a leading player in the global solar industry. The company has 5.5 gigawatts of manufacturing capacity across three countries. More than 45 countries have installed First Solar’s modules.
As the solar industry enters a new growth phase, oversized returns could be on the horizon for First Solar stock investors.