On Jan 14, 2014, Zacks Investment Research upgraded
First Solar, Inc.
) to a Zacks Rank #1 (Strong Buy).
FIRST SOLAR INC (FSLR): Free Stock Analysis
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SOLARCITY CORP (SCTY): Free Stock Analysis
SUNPOWER CORP-A (SPWR): Free Stock Analysis
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Why the Upgrade?
First Solar reported positive earnings surprises in 2 out of the
past 4 quarters with an earnings beat of 33.6%. The company's
long-term expected earnings growth is pegged at 10%.
In the third quarter of 2013, the company's top and bottom line
surpassed the Zacks Consensus Estimate and the year-ago figures,
primarily on the back of the Desert Sunlight and ABW projects, a
surge in systems business project revenues and higher module
sales to third-party customers.
Tempe, Ariz.-based First Solar is a comprehensive photovoltaic
("PV") solar systems provider. The company has operations in
several countries in North and South America, Europe, the Middle
East, Africa and Asia. With its prominent presence in Japan and
France, the company is expanding its operations in the emerging
solar markets of India, Indonesia and the Middle East.
Globally, demand for renewable resources is gradually rising
mainly due to a growing awareness among the masses about its
benefits; thereby influencing utility providers to shift to
solar, wind and water. We view this growing demand for solar
powered energy as a catalyst for First Solar's future operating
as well as financial results.
We note that most of the U.S. states have rolled out renewable
portfolio standards for electricity generation or have laid down
targets for the future. The utility providers continue to
diversify their power generation assets while adding new
renewable infrastructure to their portfolio.
We remind investors that First Solar has a strong relationship
with the U.S. utility companies and wins orders at regular
intervals. On Nov 12, 2013, the company inked a power purchase
agreements ("PPA") with member cities of the Southern California
Public Power Authority to provide electricity, generated from the
40 megawatt ("MW") AC Kingbird photovoltaic solar power plant in
Kern County, California.
Apart from winning orders from the domestic companies, First
Solar is continuously receiving orders from the international
clients for solar modules and other allied services.
Particularly, the company received numerous orders from the
Japanese companies in 2013. In Nov 2013, First Solar started
construction of a solar project in Kitakyushu-shi, Japan. In
addition, the company signed an agreement with JX Nippon Oil
& Energy Corporation to supply its high efficiency solar PV
modules in Japan. The complete phase out of the nuclear reactors
in Japan following the Fukushima disaster has increased demand
for alternate resources to power this highly industrialized
First Solar's steady effort towards improvement of the product
quality and service standards will help it to become an important
solar product provider in the U.S. solar industry and in the
global sphere. This will subsequently enable the company to
receive orders at regular intervals. In addition, winning of the
PPA ensures the company a steady cash inflow.
The present valuation also makes First Solar attractive. As of
Jan 14, 2014, the company's forward P/E multiple was 14.5x, a
discount of 43.4% to the peer group average of 25.6x. The
company's return on equity of 12.8% was significantly higher than
the peer group average.
Other Stocks to Consider
Some other stocks worth considering in the solar industry include
JinkoSolar Holding Co., Ltd.
). While JinkoSolar and SunPower hold a Zacks Rank #1 (Strong
Buy), and SolarCity carries a Zacks Rank #2 (Buy).