Monday, November 03, 2008 2:10 PM
"Trading at 17 times 2009 earnings with a long-term growth rate above 56%,
First Solar (NASDAQ:
FSLR) looks ridiculously cheap at current levels," notes
Paul Tracy.
In his
StreetAuthority Market Advisor, he adds, "Both U.S. Presidential candidates are talking about carbon regulation, which in turn will benefit green energy firms like First Solar." Here's his review.
"The company is the global leader in what's called thin-film solar technology. Thin-film cells are made from a material known as cadmium telluride rather than the more common polysilicon-based cells used by most solar PV cell producers.
"Until the financial stabilization bill was passed in October including an eight year renewal of solar tax credits, there remained considerable uncertainty about near-term growth prospects for the industry.
"Another catalyst for growth will be the more widespread global introduction of carbon dioxide regulations worldwide.
"At the G8 Summit last summer, world leaders committed to a 50% reduction in carbon emissions by 2050. To achieve that goal, they've agreed to meet in Denmark next year to establish targets.
"We also like FSLR's exposure to long-term contracts. FSLR has signed contracts to sell 3.3 gigawatts of solar cells to major international solar project developers between 2008 and 2012. These deals help FSLR lock in attractive revenues and growth over the next few years.
"FSLR's main competitive advantage is simple: cost. Traditional PV cells are made from polysilicon, a material that's also used to make semiconductor chips.
"With global production capacity limited, polysilicon prices have been rising and there have been periodic shortages in recent years. This raises the materials costs for traditional PV manufacturers.
"But FSLR's chips are manufactured from cadmium telluride, a material that's not in short supply. This lowers the company's manufacturing costs.
"Due to its low cost base, FSLR expects to achieve grid parity--the cost of producing power from its cells is equivalent to traditional fossil fuel plants--by 2010 to 2012.
"First Solar benefits from the highest profit margins in the industry; the company's low-cost manufacturing base allows it to sell PV equipment at a discount to competitors and still earn superior margins.
"The stock's severe sell-off in recent weeks looks to be more based on broader market selling than FSLR's fundamental performance. Investors wanting to access the growing solar industry would be well served by buying at current levels."
http://www.istockanalyst.com/article/viewarticle+articleid_2761386.html
