First Solar ( FSLR ) is engaged in the manufacturing and sale of solar modules with an advanced thin film semiconductor technology. The firm also designs, constructs and sells photovoltaic (PV) solar power systems to customers around the world. First Solar competes with other solar industry players like SunPower ( SPWRA ), Suntech Power ( STP ) and Yingli Green Energy Holding Com ( YGE ).
Launch of Coverage on First Solar; $153 Price Estimate
We recently launched coverage on First Solar with a $153 price estimate for the company's stock. Our number stands roughly 10% below market price.
We've broken down our analysis of First Solar into four main business segments:
Global Solar Industry
High installation costs have been the biggest inhibiting factor to the adoption of solar energy in the past, with traditional energy sources like coal and oil being a more cost effective solution. However, the rising costs of coal and oil and the increasing focus on sustainable sources of energy amidst growing environmental concerns has triggered a change in this trend. Government policies and subsidies to drive adoption of renewable sources of energy should help the growth of the solar industry in the years to come.
The global solar installed capacity stood at more than 20 gigawatts ( GW ) in early 2010. This figure is expected to reach almost 980 GW by 2020, with the United States, Germany, Italy and China playing the largest role in this growth.
Production costs of solar cells, and correspondingly, solar modules are also decreasing due to declining input costs, particularly polysilicon and silicon. Generous rebates would further reduce the price of solar panels for consumers and increase sales.
First Solar's Niche
International PV module sales contribute more than 60% to our estimated stock value for First Solar. First Solar has been the biggest manufacturer of PV modules year after year in the recent past. First Solar's strength in the industry can be attributed to its extremely low manufacturing cost per watt of energy.
In fact, First Solar was the first company to reduce manufacturing cost per watt below $1, making it comparable to power generated by other conventional means. First Solar achieved this breakthrough in early 2009, and further reduced its per watt manufacturing cost to almost 75¢ by the end of 2010.
The firm has also focused on expanding manufacturing capacity in low cost manufacturing locations. Management continues to focus on cost reduction and anticipates bringing the manufacturing cost per watt to make solar modules to between $0.52 and $0.63 by 2014. We believe this will be the largest driver of First Solar's equity value going forward.