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TheStreet Open House

First Solar May Have Just Signaled It's Overvalued

Apple and GE are buying back stock because they have money in the bank and solid positive cash flow. First Solar has nearly $1 billion dollars in the bank, and based on the midpoint of the company's 2013 guidance of $4.25, it should add more than $250 million, bringing the total cash to more than $1 billion dollars without an offering.

Why does First Solar's leadership believe a billion dollars isn't enough and that it needs to increase the size of their checking account?

On possibility is that management thinks the stock is overvalued so the company should raise capital now while it can. Another is that First Solar wants to position itself to make acquisitions while the market is depressed.

The company also stated that the funds may be used for general business purposes. After considering the cash and cash flow position of the company, investors shouldn't be surprised to find a company or two being bought out.


The key is to find which companies if any are likely takeover targets. Possible targets will be the subject of a future First Solar article, but in the meantime, if we learned anything from yesterday's announcement, we know First Solar's forecast is anything but clear.

At the time of publication, Weinstein had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein currently blogs, mentors traders, and writes several weekly columns in Rocco Pendola's Option Investing newsletter from his home in northern Wisconsin. Robert tends to focus on the psychological importance of goals, risk mitigation, emotion, and relatively short term market exposure. With nearly 30 years of studying and investing experience, Robert has experienced the many ups and downs in the financial markets and uses the knowledge gained to maintain balance. Robert believes the best way to make money investing is to avoid losing it. The best way to avoid losing is to know what emotional traps lay in the path of investors and learning how to avoid them. Robert is a voracious reader of financial related books often completing more than one book a week while not trading or writing. Robert contributes to his blog at paid2trade.com on a regular basis with an emphasis on studying behavior finance.


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