LOS ANGELES First Solar shares logged their biggest ever one-day jump on Tuesday after the company said revenue and earnings for the next three years would be well above most Wall Street estimates and announced that it would acquire a new solar technology.
The 45 percent jump in First Solar's stock was reminiscent of the company's, and the broader solar industry's, high-flying stock gains from late in the last decade.
First Solar and its fellow panel manufacturers were Wall Street darlings before a surge in Chinese production and reduction in generous government incentive programs in Europe created a global glut of solar panels that over the last two years sent prices into a tailspin and erased profits in the fast-growing industry.
The company's shares rose $12.31, or 45 percent, to close at $39.35 on the New York Stock Exchange. They hit a high of $41 earlier in the session, a level unseen in more than a year, but still far below the $300 the stock traded for five years ago.
The U.S. solar panel maker surprised investors by announcing at an analyst meeting in New York that it would acquire Silicon Valley startup TetraSun for an undisclosed amount from JX Nippon Oil Energy Corp and other investors. It will begin commercial manufacturing of the high-efficiency crystalline silicon technology in the middle of 2014.
The move marks a big shift for First Solar, whose cadmium telluride panels have long been the cheapest in the market but are not as efficient at turning sunlight into electricity as traditional silicon-based products. As prices on silicon panels plummeted, First Solar's cost advantage eroded, and so did its cache with investors.
The TetraSun acquisition will give First Solar a foothold in markets where limited space requires a higher-efficiency product, such as rooftops, Chief Executive Jim Hughes said in an interview.
The company made the TetraSun announcement at the end of its lengthy analyst day, during which it said 2013 results would be higher than the market expected because it would begin recognizing revenue from a massive California power plant in the second half of this year. First Solar also said its low-cost solar panels would help it clinch contracts beyond its current pipeline in the coming years.
"The company is ascribing a lot of credit for project wins in the future," said Raymond James solar industry analyst Alex Morris. "It's debatable how realistic that is, but they are obviously pretty optimistic."
"CLASSIC SHORT SQUEEZE"
Morris called the stock rally "a classic short squeeze." About 20 percent of First Solar shares were held in short positions as of March 15.
Short-sellers borrow shares and sell them, seeking to profit by returning them after buying them back at a lower price. A short squeeze occurs when the share price rises instead, forcing the borrowers to try to buy them back at a higher price, thus pushing the share price even higher.
First Solar expects 2013 net sales of $3.8 billion to $4 billion and earnings per share of $4 to $4.50, excluding one-time items. About 90 percent of its sales for this year are already contracted.
Wall Street analysts, on average, had been expecting revenue of $3.122 billion and earnings per share of $3.51, according to Thomson Reuters I/B/E/S.
First Solar said it would recognize about one third of the revenue from its 550 megawatt Desert Sunlight project in Riverside county, California, this year. That project is being built by First Solar but is owned by NextEra Energy Inc, General Electric and Japan's Sumitomo.
Earlier in the day, the Tempe, Arizona, company said at a meeting with analysts in New York that it would reduce its manufacturing costs per watt by nearly 40 percent over the next four years.
First Solar expects its cost per watt to be between 63 cents and 66 cents in 2013, dropping to 53 to 54 cents next year, its senior vice president of global operations, Tymen De Jong, said. That is expected to fall to 40 cents by 2017, he added.
The price of solar panels has been falling dramatically in recent years due to a massive increase in global manufacturing capacity, mostly in China. Four years ago, First Solar's cost per watt was slightly below $1.
For 2014, the company expects earnings of $2.50 to $4 per share on net sales of $3.5 billion to $4 billion. The company in 2015 expects earnings per share of $4 to $6 and revenue of $4.2 billion to $4.8 billion.
Analysts had been expecting 2014 earnings per share of $3.27 on revenue of $3.349 billion, according to Thomson Reuters I/B/E/S, and 2015 revenue of $3.653 billion and earnings per share of $3.36.