First Solar ( FSLR ) may have lost its long-held position as the largest producer of photovoltaic (PV) modules to Suntech Power (NYSE:STP) last year, but this has only made the solar industry giant push its business in existing and emerging solar markets harder. With the growth in the solar sector worldwide largely driven by European countries in the past, near term incremental growth will come from the U.S. Here we provide an overview of First Solar's solar module sales in the US and highlight how the competitive threats from other solar industry players like SunPower (NASDAQ:SPWRA), LDK Solar (NYSE:LDK) and Yingli Green Energy (NYSE:YGE).
We have a price estimate of $144 for First Solar's stock, which is about 20% above the stock's current market price.
First Solar's Presence in US is Unrivaled
The capacity of PV modules sold by First Solar in the U.S. increased from 2.4 megawatt ( MW ) in 2007 to 225.8 MW in 2010. We attribute this substantial growth to an increase in demand primarily driven by renewable portfolio standards. These standards require utility companies to supply a portion of their total electricity from renewable energy sources such as solar power.
The government has implemented various policies to meet the renewable energy targets - which facilitated the rapid growth. In 2008, Congress extended the 30% federal investment tax credit for both residential and commercial solar installations for a period of eight years. In addition, the American Recovery and Reinvestment Act of 2009 provided direct benefits for on-grid solar electricity generation.
We Expect More in the Future
The growing uncertainty in the European markets and its effect on First Solar was highlighted by us in our article titled First Solar Finds its European Stronghold on Shaky Ground . With global demand for solar components expected to increase every year, U.S., Canada and China will show largest growth.
Growth in the U.S. is expected to continue on the back of the renewable portfolio standards coupled with Congress pushing solar incentives at a faster pace. Some states have come up with their own mandates like the state of California which has set itself a target of generating at least 33% of its electricity from renewable sources by 2020.
These factors lead us to believe that First Solar would sell almost 1,200 MW of solar components in the US alone at the end of five years.