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First Solar Can Weather the Storm in Italy
6/22/2011 8:48:00 AM
First Solar ( FSLR ) seems to be in a better shape than its biggest rival Suntech Power (NYSE:STP) when it comes to the sale of photovoltaic (PV) modules in Italy. Although the Italian government previously decided to continue its current incentive programs for solar projects through the end of August, the industry anticipates significant cut-backs in subsidies and other incentives at the end of the period. This sentiment is strengthened by a recent announcement of reforms in the country's solar-energy incentives scheme, which could put more than 1 billion euros ($1.41 billion) of the sector's financing up for renegotiation. But this decision is unlikely to affect First Solar as much as its competitors Suntech, SunPower (NYSE:SPWRA), and Yingli Green Energy Holding Com (NYSE:YGE).
We have a price estimate of $144 for First Solar's stock, implying a notable premium to market price.
Italy is a Significant Solar Market
Italy is the fourth largest market for solar components in the world, after Germany, the U.S. and France.
But Uncertainty in Italy's Market will Have a Limited Affect on First Solar, at Least for the Short-Term
Despite the company's considerable dependence on Italy, First Solar has been able to protect its interests in the country to a large extent by entering into long-term supply contracts with its customers. The company's strong presence in Italy soon after the country's solar program was launched helped it achieve this competitive advantage. Suntech Power has not been so lucky, with sales in the country expected to drop this year. You can read more about this in our article titled " Italy Growing in Importance for Suntech - So What's the Outlook?"