Why First Solar Is a Must Buy

First Solar (FSLR) announced first quarter ended April 30, 2016 net sales of $848.5 million, up 81 percent year-over-year from $469.2 million during the same period last year but, down 10 percent sequentially from $942.3 million in fourth quarter of 2015. Going forward, the company estimates complete fiscal year 2016 net sales to be in the range of $3.8 billion to $4.0 billion.

Strong financials

First Solar declared first quarter of 2016 net income of $170.6 million or $1.66 per diluted share, up 4 percent sequentially from $164.1 million in fourth quarter of 2015 and significantly higher than the first quarter of 2015 net loss of $60.9 million or $0.61 of loss per diluted share.
Moving ahead, the company projects 2016 net earnings per share to be in the range of $4.10 to $4.50 range, updated from the previous net earnings per share range of $4.00 to $4.50.

The key solar panels manufacturing company reported continued sequential and year-over-year improvements in both its top and bottom lines primarily driven by the improved top line growth from Desert Stateline, enhancements of system costs and just once benefit from strategic sale of some restricted investments somewhat offset by greater tax expenditures.

The projected total revenue till date ending April 27, 2016 was recorded at $6.4 billion, slightly below $6.9 billion of consolidated revenue registered by the year ending December 31, 2015 and mainly impacted by $0.8 billion decline in first quarter of 2016 total sales somewhat offset by $0.3 billion improvement in 2016 year-till-date bookings.

The estimated module shipments for First Solar including, third-party module and key systems shipments declined slightly to 4.0 GW as of April 27, 2016 from 4.2 GW by the year end December 31, 2015 due to 0.8 GW decline in first quarter of 2016 shipments and somewhat offset by 0.6 GW improvement in year-till-date 2016 bookings.

The ongoing weaker global commodity demand and pricing environment has primarily impacted the company sales or total shipments and thus, reducing FIRST SOLAR’s top line growth.

Impressive opportunity ahead  

First Solar has significant likely booking prospects worth 23.3 GW of development opportunity by growth stages with a majority bookings for early-stage and rest for mid-to-late stage of development. There’s also notable estimated booking prospects for FIRST SOLAR by geography with expected booking prospects distributed geographically in descending order for North America, Latin America, India, Middle East, Africa, APAC and Europe.

First Solar and SunPower Corporation have recently signed an agreement to possess and operate a range of superior and result-oriented energy production assets. Further, the company lately declared an IPO to generate funds for developing 8point3 Energy Partners that expects to utilize all these key proceeds of the IPO to buy common divisions of 8point3 Operating Company, LLC.

The integrated photovoltaic and advanced solar systems provider has impressive near-term and long-term growth opportunities which is expected to drive sustainable company growth which is extremely well-diversified and well-distributed across all the stages of development.

Importantly, First Solar has efficiently executed upon the operations and technology roadmap for the fiscal year 2016 with first quarter full fleet typical efficiency of about 16.2% compared to 16.1% during the fourth quarter of 2015. Also, the lead line efficiency is believed to remain constant at 16.4% with First Solar having booked more than 600 MW of power production capacity year-till-date 2016.

Conclusion

Overall, the investors are advised to “Buy” equity in First Solar, Inc. considering the company’s significant near-term and long-term growth prospects being supported by a solid financial position with healthy total cash of $1.88 billion and smaller total debt position of $344.68 million only, encouraging the company to make future growth investments while allowing it to offer attractive shareholder returns. The profit margin of 19.65% also seems impressive. However, the PEG ratio of -0.87 appears misguiding and indicates no company growth but decline.
Published on Jul 18, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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