Why First Solar Isn't Worth Your Time

NEW YORK (TheStreet) -- First Solar (FSLR) 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.

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