What Will 2018 Hold For First Solar?

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FSLR: First Solar logo
FSLR
First Solar

First Solar (NASDAQ:FSLR) had a strong 2017, driven by strong solar demand as well as stronger than expected panel prices, with its stock price almost doubling over the last year. We expect 2018 to be an interesting year for the company, as it prepares for the commercial launch of its next-generation Series 6 panels. First Solar has guided for shipments of about 2.7 GW of solar panels over 2018, with revenues projected at between $2.3 billion to $2.5 billion. Below we take a look at some of the key trends that investors will need to watch for the company.

See Our Complete Analysis For Solar Stocks First Solar and  SunPower

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

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Launch Of Series 6 Panels

First Solar will commence commercial production of its new Series 6 panels at its Ohio facilities in Q2 2018. We view the product as being crucial for First Solar, as it allows it 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. The production cost of the new panel could come in at as low as 25 cents a watt after the company reaches full production capacity, potentially allowing it to compete more directly with Chinese players in the ground-mounted market. Demand for the 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 projected for 2018. That said, the launch will come with some near-term costs. The company is guiding CapEx of about $650 million, up from about $450 million in 2017, with additional COGS and operating expenditures relating to the Series 6 expansion coming in at about $170 million.

Will First Solar See Regulatory Tailwinds With Section 201 Case?

The final outcome of the Section 201 case that seeks to impose trade barriers in the solar industry will also be a key factor to watch for First Solar in 2018. Last September, the U.S. International Trade Commission (ITC) issued a preliminary ruling stating that cheap solar imports were hurting American manufacturers, effectively allowing President Trump to make a final call on the case by January 26. While the ITC has made its recommendations for tariffs, which have come in lower than expected at between 0% on cell imports up to 1 gigawatt, to as much as 35% tariff on solar modules, First Solar will nevertheless be a beneficiary, as its panels won’t see an increase in their landed costs unlike its imported rivals. Although First Solar says that the outcome of the case will have a very limited impact on its 2018 guidance, the imposition of tariffs should give the company a window of opportunity to bolster its volumes and margins in the U.S. market before other players move plants to the U.S. to bypass any trade barriers.

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