First Solar (FSLR 40.55, -2.97, -6.82%) is trading lower after reporting Q3
results/guidance last night.
Solar stock First Solar is a supplier of PV solar modules. In fact, it identifies itself as the world's largest thin-film PV solar module manufacturer and one of the world's largest PV solar module manufacturers. Its thin-film technology is cheaper to make and generates more solar electricity than a number of its competitors, up to 8% more energy than conventional crystalline silicon solar panels for the same nameplate watts capacity.
On the product innovation front, FSLR recently launched its Series 6 module technology, which the company touts as a significant improvement in solar technology. Series 6 has a combination of high conversion efficiencies, low manufacturing costs, larger form factor, and balance of systems component compatibility. FSLR expects that its transition to Series 6 module technology will enable the company to maximize the intrinsic cost advantage of CdTe thin film technology vs crystalline silicon.
Specifically, its Series 6 PV modules deliver the highest power output for large-scale solar projects, significantly more energy per watt installed than conventional silicon modules in many climates. Its delivers more watts per connection (420+ watts) than 72-cell silicon modules (<400 watts). It also offers reduced shipping costs; its under-mount frame is designed to enable a horizontal stacking configuration, which optimizes shipping density, reduces breakage, and minimizes waste. It also requires lesser maintenance costs than other industry models as its under-mount frame promotes natural snow shedding and rainfall cleaning.
Turning to the Q3 results, EPS came in at $0.54, was down sharply from the prior year period’s $1.95 EPS but nevertheless well above market expectations. However, revenue fell 37.8% year/year to $676.2 mln, which was below market expectations. As for 2018 guidance, FSLR lowered EPS guidance to $1.40-1.60 from $1.50-1.90. It also lowered revenue guidance to $2.3-2.4 bln from $2.5-2.6 bln.
From an operations standpoint, FSLR has started the first commercial shipments of Series 6 from its factory in Vietnam, and progress to date on the initial ramp has been good. Commercially, FSLR continues to be pleased with strong demand for its technology, as evinced by net bookings of 1.1 gigawatts since its last earnings call. It's important to note that FSLR has booked over 1.6 gigawatts since the May 31 solar policy change in China.
In a broader sense, the low cost of solar power continues to be the primary driver of demand. Beginning with conditions in the U.S., solar procurement from utilities and corporate customers is, the company noted in its earnings call, “strong and growing”, and the company expects that this procurement trend in favor of utility-scale solar will continue to be robust moving forward. FSLR expects utilities outside of California, including in growth regions like the MidWest and the mid-Atlantic, which are still at earlier stages of uptake with regards to utility-scale solar infrastructure, to procure more than 15 gigawatts of solar in the coming three years, an estimation that has increased by several gigawatts during the past year.
Factoring back in additional procurement in a more established solar state like California, which has passed the mandate for more than 60% of renewable power by 2030 and has decided to close its last nuclear power plant by 2025, the potential for solar growth in the U.S. over the next several years is, says the company, quite strong.
While demand seem to be holding up well, module pricing has been coming under pressure for FSLR and others. On the call, FSLR said it saw a roughly 10% ASP decline, but management was happy with that in this market environment. Weaker prices are clearly having an impact on the PV module space. The stock has been under pressure since late May, when it was trading around $70; it currently trades at around $40. That's the thing with solar stocks -- they can be pretty volatile, and it's not clear when PV module prices will recover.
- OUR VIEW
- LEARNING CENTER