First Solar: Go Long for Strong Gains
First Solar (FSLR) is aggressively reducing its operating expenses. For instance, its operating expenses in the previous quarter came in at $97.69 million, a decrease of 10% as compared to operating expenses of $109.09 million in the same quarter last year. The good part is that this improved operating costs structure is driving its margins. As such, its operating profit for the quarter increased 25% to $165 million as compared to operating profit of $132 million in the first quarter of 2015.
Looking ahead, First Solar expects its cost per watt to decrease significantly due to rise in the capacity and increased installation, driving efficiencies and margins.
Strong demand for solar will be a tailwind for First Solar
The increasing use of solar energy is driving the solar demand in the United States. According to the GTM, the U.S industry is believed to install approximately 14.5 gigawatts of solar power in 2016, a rise of 94% as compared to over the record 7.5 gigawatts installed in 2015. Due to this increasing installation of solar power, the revenues from solar installation increased over 21% to $22 billion in 2015 as compared to 2014.
The momentum in solar installation is clearly seen this year, as GTM reported approximately 1,665 GW of solar PV in the first quarter of 2016. Thus, the increase installation this year should allow the solar companies to improve their top line performance this year. At this point, the investors should not forget that First Solar is expected to install approximately 3.1 gigawatts of solar, representing approximately 21.5% of the total installed solar power in the United States.
Thus, First Solar remains a solid bet with the improvement in the technology. These advancements in the technology will enable the company to reduce its production costs significantly in the future, as stated above. Moreover, the market for solar remains bullish going forward which should keep its top line performance intact ahead. So all-in-all, First Solar is a safe investment in the long-run.