The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
is engaged in the manufacturing and sale of solar modules with an advanced thin film semiconductor technology, and it competes with other solar industry players like
Yingli Green Energy
First Solar's average price per watt of energy from the sale of solar modules has declined steadily since 2007, with a major decline seen in 2009, caused by competitive pressure and the commencement of the customer rebate program during the third quarter of 2009, as well as a decrease in the foreign exchange rate between the dollar and the euro. As the production cost decreases, the average selling price will continue to decline, making solar a more attractive alternative energy solution.
While we anticipate the average price per watt of energy sold by First Solar will decline to $0.96 by the end of our forecast period, Trefis members predict the price decline will be smaller, reaching $1.23. The member estimates imply an upside of 14% to our price estimate for First Solar's stock.
We currently have a Trefis price estimate of $155 for First Solar's stock, just slightly ahead of the current market price of $149.
Increase in Solar Demand
Demand for PV modules has increased nearly 42 times in the last decade -- from 170 MW in 2000 to around 7,059 MW in 2009 -- mainly spurred by government incentives. Rising demand will likely push down prices of polysilicon, the main ingredient used in the making of PV modules. Even though First Solar does not use polysilicon for the production of its modules, and instead uses a proprietary thin film technology that consists of cadmium telluride, a rise in the price from competitors due to an increase in the price of polysilicon will enable First Solar to be more competitive and charge higher for PV modules.
Polysilicon prices increased from $200/Kg in 2007 to $450/Kg in 2008 due to shortages in polysilicon and increased demand. During the economic recession, polysilicon prices fell drastically as demand declined. Average estimates indicate that polysilicon prices are likely to hover as a result of oversupply and average around the $60/ Kg mark towards the end of 2011.
Exchange Rate Volatility
A large portion of First Solar's module sales have been generated in Europe, particularly in Germany. The past strength of the euro compared with the U.S. dollar benefited several solar manufacturers. Most economists believe that the dollar will gradually weaken over time against major currencies. This should help benefit the average sales price (ASP) for major producers.
Trefis Community Forecast
Trefis members forecast First Solar's average price per watt will decrease from $1.60 per unit in 2011 to $1.20 by the end of the Trefis forecast period, compared to the baseline Trefis estimate of a decrease from $1.4 to $1 per unit during the same period. The member estimates imply an upside of 14% to the Trefis price estimate for First Solar's stock.
Trefis members constitute more than tens of thousands of users of the Trefis platform, inclusive of investors, financial analysts, and business professionals who use the Trefis platform to create their own models and price estimates.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.