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(FSLR - Get Report)
are off roughly 20% today [Feb. 25] to around $110. It could have been worse: Some analysts slashed their price targets down to the $60 to $90 range on the heels of a more cautious management outlook for 2009.
Shares do indeed look vulnerable to further selling, as the next few quarters could prove to be a bit scary. But shares are unlikely to reach those most bearish targets, as the company's brighter longer-term outlook is likely to lure buying support if the stock breaches the $100 mark.
Most importantly, as I'll note in a bit, the outlook for smaller, more poorly capitalized rivals could really get hammered in coming quarters.
At first glance, First Solar's quarterly report was quite impressive. Fourth-quarter sales rose 24% sequentially to $434 million, and full-year sales rose more than 140% to $1.25 billion. The $132 million in quarterly profits made a strong cash balance even more impressive, rising to $852 million. Most rivals are far less flush, and those that hope to raise money to keep going in 2009 may be out of luck.
First Solar also broke the magical $1 mark in terms of costs per watt. That's an industry first, and it keeps the company well below its peers that rely on polysilicon. In fact, management says that metric could fall to 65 cents in a few years, which implies that we are moving closer to the day when solar power can effectively compete with fossil fuels without the support of subsidies.
That's the good news. The bad news: The current year is shaping up to be pretty lousy. Customers are having a hard time borrowing money for projects, rivals are benefiting from sharp drops in polysilicon prices (spot prices have fallen from a peak of about $450/kg in mid-2008 to below $150 kg), and the industry continues to overproduce, thanks to capex decisions made a year or two ago.