By Nichola Groom
LOS ANGELES, April 9 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
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
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
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
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.