FSLR Stock: Could First Solar, Inc. Be the Next SunEdison Inc?
The global movement towards a greener climate may be slower than many environmentalists want, but it’s moving in the right direction. Over the last decade, we have seen a surge in solar and wind plays as alternatives to fossil fuels. Yet the growth has been reckless in some cases, such as at SunEdison Inc (OTCPK:SUNEQ), which is drifting in Chapter 11 bankruptcy. But instead of running for the exits, there are numerous strong solar names that deserve a look, including First Solar, Inc. (NASDAQ:FSLR) stock.
If you got scorched by SUNE, I would understand if you are somewhat hesitant, but my view is that solar power technology is here to stay and it will only improve going forward.
The reality is that solar power is declining in cost to the point where it is moving closer to the cost of regular generated energy. When this happens, trust me, the demand for solar power will explode.
SunEdison had the right idea. The problem was its poor execution and decision to ramp up too fast, adding massive debt along the way.
My thinking is that once solar power comes down in price, customers will flock to it, especially if government credits are made available.
My Bullish Case for First Solar
First Solar designs and produces high-quality photovoltaic (PV) solar energy solutions. The PV solutions use the company’s proprietary thin film semiconductor technology.
With a global presence, FSLR stock’s mandate is to develop solar power solutions at a low cost that is close to what you would pay for non-subsidized electricity.
This makes sense. Imagine companies and residences having the option to buy solar power at the same cost as dirty energy? I trust the majority would select the green option. This is where First Solar comes in and why I like its business model.
FSLR stock is worth a closer look at its current levels, down around 27% from its 52-week high of $75.29 recently in March.
Chart courtesy of www.StockCharts.com
The company doesn’t have the financial risk with heavy debt burdens that sank SunEdison. First Solar has a healthy balance sheet with only $330.00 in debt and a strong free cash of $1.83 billion. This makes it clearly different from SUNE.
First Solar has managed to ramp up revenue in 2014 and 2015, along with controlling its cost side and gross profits.
Revenue is expected to rise 8.4% to $8.88 billion this year, but contract 8.5% in 2017.
Earnings have edged higher in the past two years, but there is a pause for the next two reportable years, which may be related to heavy costs to build capacity.
The bottom line is this: don’t be scared off by what happened to SUNE stock—First Solar should not be considered in the same vein.