An epic explosion inFirst Solar ( FSLR ) shares Tuesday blasted its competitors and ETFs into the stratosphere after the largest U.S. solar panel maker's outlook eclipsed analysts' expectations on top of acquiring another company.
First Solar rocketed 45.53% to a 14-month high of 39.35. Volume swelled nearly eight times average.
Demand was so fierce that trading was halted for five minutes midday. At an analyst event in New York, the Tempe, Ariz.-based company said it expects net sales of $3.8 billion to $4.0 billion this year -- an increase of 12.7% to 18.6% over 2012 revenue of $3.37 billion.
Analysts polled by Thomson Reuters had forecast revenue of $3.12 billion.
Module shipments are expected to total 1.6 gigawatts to 1.8 GW. One gigawatt equals one billion watts, or 1,000 megawatts. First Solar expects gross margin of 20% to 22% and earnings per share of $4.00 to $4.50, down 8% to 18% from 2012 earnings of $4.90 a share. Analysts expected 2013 earnings of $3.51 a share.
First Solar said in the last hour of trading that it signed a deal to buy San Jose, Calif.-based TetraSun, a solar-panel startup, from JX Nippon Oil & Energy Corp. and other investors, including TetraSun management. The terms of the deal were not disclosed, and it's expected to close in second quarter.
First Solar plans to manufacture TetraSun's solar cell technology in the second half of 2014, the company said in a statement.
"Of the solar companies, it has the strongest fundamentals," Thomas Carr, founder and CEO of Kingdom Capital in Canton, Ohio, and founder of Befriendthetrend.com, wrote in an email. "Management's presentation today spoke of new efficiency measures, which will reduce production costs about 40% over four years and thus boost their otherwise poor margins, and Chinese competitors have new government regulations to worry about."
Competitors rallied in sympathy. China-basedTrina Solar ( TSL ) spiked nearly 15%. SunPower ( SPWR ), based in San Jose, Calif., vaulted 17%. Former leaderSuntech Power (STP) rallied 29%.LDK Solar (LDK)shot up 23%.
Solar ETF Chart Analysis
TAN surged off its 200-day moving average and regained its 50-day line for the first time in three weeks as volume increased nearly four times average. Trading above both the 50- and 200-day lines signals a strong uptrend.
But this large one-day bounce "straight up from the bottom" is prone to profit-taking or consolidating as buyers who bought as shares were falling sell to get out even.
The rally in First Solar shares was "too much too fast" and "overdone," Carr believes.
"Thirty percent of the float was sold short, so this is just a classic short squeeze gone mad," Carr wrote. "Technically, the price is up against a resistance line that began back in August of last year. We should see that line hold as a ceiling."
A trend line connecting the peaks from August 2012, December 2012 and January 2013, shows First Solar could hit resistance at around 42 a share.
Guggenheim Solar ETF Top Holdings And Percentage Change Tuesday:
First Solar ( FSLR ) 45.53%
GCL-Poly Energy Holdings Ltd . 5%
Power-One (PWER) 3.7%
MEMC Electronic Materials (WFR) 10.07%
GT Advanced Technologies (GTAT) 7.49%
Hanergy Solar Group -2.94%
Meyer Burger Technology AG (MBTN) -0.14%
Advanced Energy Industries (AEIS) -1.1%
SunPower ( SPWR ) 17.07%
Renewable Energy (REC) 7.91%
Trina Solar Ltd. ( TSL ) 14.58%