How First Solar’s Big U.S. Expansion Will Push Shares Higher

NEW YORK (TheStreet) -- First Solar (FSLR)  -- whose shares have gained 27% this year, outpacing the broader market -- is pushing ahead to maintain its position as the leader in the U.S. solar market leader and the global leader in the thin-film technology that most Chinese companies have abandoned.

The company has claimed a 21% efficiency level in its research labs, but its average production panel still converts only 17% of sunlight into electricity. Most of the market relies on silicon-based systems, and the vast majority of production now comes from China. 

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First Solar's was pulling back 1.2% to $69.08, trimming its 2014 advance to 26%, easily outpacing the S&P 500 SPX, which has gained 7.5% this year.

Solar analysts are bullish on First Solar. Technicians see the stock putting in a reverse head-and-shoulders bottom that could drive it to $80, while fundamental analysts are happy about the company's contract to build a 250-megawatt power plant in Nevada for NextEra Energy (NEE) and completion of a company-owned plant in Texas selling electricity on the spot market.

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Still, political obstacles for solar remain. Those are focused on the intermittent nature of solar power and the need for back-up systems. Some utilities are also seeking to impose charges on homes and businesses with panels for access to the grid. But at the same time, utilities continue to invest heavily in large solar projects.

Utility-scale projects match the utility business model of setting rates based on capital expenditures, and they're cheaper on a per-watt basis, as 80% of costs are "soft costs" for permits, financing, fittings and construction.

First Solar says it can get its "hard costs" down to 35 cents per watt by 2018. That would be half the current level and would make solar competitive with natural-gas power plants, the company posits.

Company officials didn't respond to requests for comment.

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At the time of publication, the author didn't own shares in any of the companies mentioned in the article.

Follow @DanaBlankenhorn

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


TheStreet Ratings team rates FIRST SOLAR INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate FIRST SOLAR INC (FSLR) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."

You can view the full analysis from the report here: FSLR Ratings Report

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