Recent Developments Could Bode Well For First Solar’s Future

by Trefis Team
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First Solar (NASDAQ:FSLR) had a relatively eventful week, as it conducted its analyst day event, during which it unveiled its first functional large format Series 6 thin-film panel, while also announcing a stronger than expected set of guidance numbers for 2018. The stock rallied by close to 16% over the last week, following the news. In this note, we provide some updates relating to the company’s Series 6 transition and its guidance.

We have a $57 price estimate for First Solar, which is below the current market price.

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Series 6 Panels 

The company unveiled its first functional Series 6 panel at its Perrysburg, Ohio facilities, roughly a year after factory retooling started. The new panels, which will go on sale next year, are viewed as the most important product the company has announced in recent years, as they allow First Solar to compete more directly with silicon-based panels in terms of both conversion efficiency as well as total rated power. For instance, the current Series 4 panels have a peak rated power of about 120 watts, compared to the Series 6 modules which have a peak power of between 420-445 watts.  Demand for the all new panels also appears to be strong, with First Solar noting that it has booked or expects to book about 3 GW of orders through the end of 2017, with bookings of about 2 GW expected next year.

Focusing On Improving Panel Efficiencies

While the company improved its panel efficiencies from levels of around 13.1% in 2012 to about 16.8% in 2016, its gains were limited over 2017 (projected efficiency of 17%), as its resources shifted towards its Series 6 transition. That said, with the Series 6 transition progressing as planned, First Solar could begin to shift its focus back to improving its panel’s efficiencies. First Solar’s current record cell efficiency stands at 22%, enabling modules that have efficiencies of over 20%. First Solar notes that it sees the potential for producing 25% efficient cells in the near future. Moreover, First Solar’s Cd-Te technology has a theoretical upper limit of ~28% cell efficiencies, which could enable a lot more room for panel efficiency and cost reduction, versus silicon panels in the long-run.

Manufacturing Updates

First Solar has also announced that it would be expanding its production facility in Vietnam, almost doubling production capacity of the initial site, which is still under construction. The company now expects an annual production capacity in Vietnam of about 2.4GWdc. This, in combination with the Ohio and Malaysia facilities, will give First Solar a total manufacturing capacity of about 5.7 GW by 2020, with roughly 5 GW coming from the Series 6 modules.

2018 Guidance 

First Solar’s guidance for the year 2018 was more favorable than analysts were expecting. The company expects to ship over 2.7 GW of solar panels, guiding revenues of between  $2.3 billion to $2.5 billion and an EPS of $1.25 to $1.75. This compares to a $1.25 estimate compiled by Bloomberg. Solar power systems are likely to account for between 75% to 80% of the total revenues,  with third-party modules accounting for the rest.

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