This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why First Solar Isn't Worth Your Time

NEW YORK ( TheStreet) -- First Solar (FSLR - Get Report) shares aren't going to zero, but the stock is worthless.

The solar company has left investors with way too many questions and too few answers and is dead money in 2012 as the company continues to lay out a vague long-term plan for 2013 to 2015.

Solar has always been a better trade than investment, and the action in First Solar in 2012 is a typical sign of that maxim: Shares rallied to as high as $50 earlier this year, or by 35%, after falling by 70% last year. If shares were oversold they were then quickly overbought and after Wednesday morning's 10% drop, shares are now slightly negative in 2012 trading.

If solar remains good for a trade from time to time, it remains a pass based on 2012 fundamentals which imply profitless years for the Chinese solar companies even as shipments grow, and a year of transition for First Solar.

First Solar may now be back at square one in terms of 2012 trading, but it's not back at square one in terms of either its short-term or long-term outlook. The company seemingly cleared the decks in its December 2011 guidance, after ousting former CEO Rob Gillette and bringing Chairman Michael Ahearn back in as interim CEO. But things now look even worse, or as Stifel analyst Jeff Osborne wrote, a "bleaker outlook" than just two months ago.

"We did not get a sense that the company is firmly on the path to navigate the current challenging environment," Stifel's analyst wrote.

And go figure: Without a permanent CEO in place, First Solar said it will soon unveil a three-year strategic plan that should show investors where it is going and how it will succeed. How can First Solar be cementing a three-year plan that it will unveil in May when it is still conducting a search for a CEO?

Here are some of the headline details:

  • First Solar lowered revenue and cash flow guidance for 2012;
  • Underutilization charges are mounting;
  • Third-party module sale expectations have been cut nearly by half from two months ago, implying challenged margins;
  • Its project pipeline looks stagnant with growth prospects increasingly reliant on markets with unclear ramp;
  • Finally, First Solar was light on details about the future.

While First Solar didn't lower its earnings guidance of $3.75 to $4.25, analysts see it as increasingly likely that earnings will be revised downward in 2012. Decreased cash flow is a sign of the balance sheet risk for a company that has increasing costs related to large-scale project construction.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FSLR $61.94 0.00%
YHOO $44.45 0.00%
TSLA $206.79 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs