First Solar Q1 Preview: Bookings & Efficiency Improvements In Focus

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First Solar

First Solar (NASDAQ:FSLR), the largest U.S. solar panel manufacturer, is expected to publish its Q1 2016 earnings on April 27th. We expect the company’s performance to improve on a year-over-year basis, driven by higher power plant sales, as well as lower module and balance of system costs. Below, we take a look at what to expect and what we will be watching as the firm reports Q1 earnings Wednesday.

We have a $75 price estimate for First Solar, which is about 20% ahead of the current market price.

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Solar Project Revenues

We expect First Solar’s revenues for the quarter to grow on a year-over-year basis, driven by higher revenue recognition in its solar projects business. The company had a total of about 1,634 MW of projects that were under contract or sold, with completions expected for this year. Separately, First Solar also has about 2,179 MW of projects under development with executed PPAs but which are yet to be sold. There is a possibility that some of these projects could be dropped down into its joint-venture yieldco 8Point3 Energy Partners, driving revenues.

Cd-Te Efficiency Improvements 

First Solar’s Cadmium-Telluride based module technology has been outpacing the broader solar solar industry in terms of overall efficiency improvements in recent quarters. During Q4 2015, module efficiencies rose by 170 bps  year over year to about 16.1% and the firm has indicated that efficiencies could rise to about 16.3% by the end of Q1. The higher conversion efficiencies give First Solar a performance advantage over multi-crystalline panels; they also help to lower manufacturing costs and improve effective manufacturing capacity. We will be tracking the company’s progress in executing on its technology road map.

New Bookings In Focus 

We will also be watching First Solar’s progress on the business development front. The company’s bookings for the quarter could be strong, owing to the recent multi-year extension of the Solar Investment Tax Credit –  which was slated to expire in December 2016.  (related: How A Tax Credit Extension Could Impact The U.S. Solar Industry) The extension will help to increase forecasted U.S. solar installations from 2016 through 2020 to over 72 GW, marking a 54% increase over the no-extension scenario. [1] For perspective, new bookings for 2015 stood at about 3.4 GW and year-to-date bookings for 2016 came in at about 160 MW when the firm conducted its Q4’15 earnings call in mid-February.

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Notes:
  1. Impacts of Solar Investment Tax Credit Extension, SEIA []