Last Tuesday, Rob Gillette, the CEO of First Solar (FSLR: Charts, News, Offers), surprisingly stepped down, causing shares to plunge 25% instantly as questions were raised regarding the future of the company. Gillette had held the post for over two years, and was originally hired to stabilize the company as it was battered by the global financial crisis which cast doubt on the entire future of the solar industry. Gillette was previously the chief executive of Honeywell (HON: Charts, News, Offers) Aerospace. Under his leadership, shares of First Solar held steady, hitting a 52-week high of $175 before plunging on macro concerns in America and Europe in February. Gillette’s departure was abrupt and unexplained, and is the latest in a series of high-level executive departures at Tempe, Arizona-based First Solar, leading to a rapid erosion of investor confidence. President of operations Bruce Sohn resigned in April, while utility systems chief Jens Meyeroff left in August. Board Chairman and company founder Mike Ahearn has taken over as interim CEO.
Daily Chart
First Solar has some major economic headwinds ahead that make its shares unattractive for investors. First and foremost, the European meltdown is poised to crush the entire solar industry, as Germany, Italy and other European countries currently comprise the world’s largest solar market. Debt-ridden countries such as Italy have cut back on government subsidies for solar power, and other Euro-zone countries are likely to follow suit to reduce their deficits. In addition, the embarrassing solar power loan debacle in the United States, in which the Obama administration granted a half-billion dollar loan to a now-bankrupt Solyndra, has caused the GOP to rally against continuing solar loan guarantees for private businesses. Besides Solyndra, two other solar panel manufacturers have also gone bankrupt over the past two months, strengthening the GOP’s stance in Congress. First Solar’s current projects were approved at the same time as Solyndra’s, and any legislative backlash against Solyndra and its defunct peers is likely to cause First Solar to become collateral damage.
In August and September, the company received three solar loan guarantees totaling $3 billion. Losing these channels of funding will cripple the company’s growth potential immediately. Ahearn addressed these concerns, stating, “Going forward, our goal is not just to survive the current environment, but to transcend it by creating and expanding markets worldwide that do not depend on today’s subsidy programs.” Lastly, intensifying competition from Chinese competitors have caused a pricing war in which participants were willing to sacrifice margins for market share, which frightened many investors who had previously seen the solar industry as the next major growth industry.
However, First Solar surprised investors when it released strong third quarter earnings the day after it announced Gillette’s exit, most likely to attempt to assuage disgruntled shareholders. The company announced earnings of $2.25 per share, or $196 million, an improvement over the $2.04 per share, or $176.9 million, it posted a year earlier. Revenue increased 89% year-over-year to $1 billion. Both beat analysts’ expectations, and shares rebounded 14% on the following day. First Solar’s guidance was mixed, however, as it cut its fiscal 2011 expectations down from $9-9.50 per share to $6.50 -$7.50 per share. Sales estimates were also slashed from $3.6-$3.7 billion to $3-$3.3 billion.
Ahearn was optimistic regarding the earnings, stating, “First Solar’s performance in the quarter reflects our superior technology, strong execution capability, and integrated business model – all of which have enabled us to weather a difficult market environment relatively well.” The company is still facing intense competition from Chinese solar firms, which have also been crippled by the European crisis, which remains the main source of pain for all solar stocks across the board.
Other News About FSLR
First Solar’s sales rise 89% in Q3 to $1bn
First Solar posts a solid quarter despite the loss of its CEO.
First Solar: Merrill Turns Bearish After CEO’s Surprise Exit
Merrill sees dark times ahead for First Solar.
Other Stocks in the News
Apple Receives Complaints from its iPhone 4S Consumers
Apple’s iPhone 4S gets hit by technical issues.
Google-Motorola bears its first fruit
Google’s Motorola purchase may not have been such as mad purchase after all.
Copyright 2011 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc.
No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions.
We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.
Other relevant articles you may like
Leo Sun is long-time market follower and finance writer. He regularly contributes to the Stock of the Day analysis.
Lobbyists with tight GOP connections helped Solyndra, which is headed by a registered Republican. Arnold Schwarzenegger, California’s former GOP governor, was there for pivotal moments as Solyndra was born. And Solyndra got its federal footing thanks to a program in the 2005 energy law signed by President George W. Bush and passed by a Congress controlled entirely by Republicans.
What “has caused the GOP to rally against continuing solar loan guarantees for private businesses” now is not because of some mis-step by the Obama administration, but because their single goal since he was elected is to ensure that he is a one-term president. And if they have to hypocritically reverse course on this and feign any responsibility in order to spin this to their political advantage then that’s what they’ll do, it is what they do best, and it’s certainly not anything they haven’t done before.