Why First Solar’s Stock Doubled This Year

+8.43%
Upside
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FSLR: First Solar logo
FSLR
First Solar

First Solar’s (NASDAQ:FSLR) stock has almost doubled since the beginning of this year, rising from levels of about $32 in early January to around $60 currently. The stock has also outperformed the MAC Global Solar Energy Index, an index comprised of solar stocks, which rose by about 50% in the same period. In this note, we take a look at some of the factors that were potentially responsible for the rally.

See Our Complete Analysis For Solar Stocks First Solar and  SunPower

We have a $58 price estimate for First Solar, which is slightly below the current market price.

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Strong Global Solar Demand 

Global demand for solar products has been strong, driven by lower costs which are making solar competitive with more traditional sources of electricity, even on an unsubsidized basis. Global solar demand is set to exceed 90 GW for the first time, growing by about 15% year-over-year. China has also been a big driver of solar demand, with installations in the country projected to stand at over 50 GW in 2017, driven partly by the distributed solar market. Demand for higher efficiency panels has also been growing in the country. First Solar’s net year-to-date net bookings (as of its Q3 earnings report) stood at 6.7 GW, with its total expected module shipments coming in at approximately 7.4 GW, almost double its backlog a year ago. This is partly due to the Section 201 case (explained below) which is causing project developers in the United States to accelerate module procurement timing to hedge their module costs.

First Solar Benefits From Potential Trade Barriers In The U.S.

The Section 201 case that seeks to impose trade barriers in the solar industry is also a factor that is likely helping First Solar notch new orders (related: How First Solar And SunPower Could Be Impacted By The U.S. ITC Ruling). The odds of penalties on panel imports being imposed are increasing, with the U.S. International Trade Commission issuing a preliminary ruling in late September that cheap, imported solar panels have been hurting American manufacturers, effectively allowing President Trump to make a final call on the case. First Solar is likely to be a big beneficiary if trade barriers are put into effect, as its panels use cadmium-telluride technology, which is not a target of the trade case. This could give the company a window of opportunity to bolster its volumes and margins in the U.S. market before other manufacturers move plants to the U.S. to bypass any trade barriers.

Launch of Series 6 Modules

First Solar is seeing strong customer interest in its upcoming Series 6 panels, which are set to launch in mid-2018.  The panels are viewed as one of First Solar’s most important product launches in years, as they allow it to compete more directly with silicon-based panels in terms of both conversion efficiency as well as total rated power, while bringing down costs considerably (as much as 40% below the company’s current generation Series 4 modules). The company expects Series 6 production to commence at its Ohio unit in Q2 2018, with total capacity ramping up to over 3 GW by 2019 (related: How Is First Solar’s Series 6 Transition Progressing?). The product could help First Solar improve its panel shipments, while significantly cutting manufacturing costs.

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