(New throughout, adds analyst, investor comments, details,
By Nichola Groom
April 10 First Solar Inc this week cast
itself as a formidable survivor of solar industry turmoil, but
some in the market expressed doubt that the company would be
able to meet aggressive goals for cost reductions, technology
advances and contract wins.
Investors drove the company's stock down 7.7 percent on
Wednesday as many cashed in on a staggering 45 percent rally the
day before. During a lengthy meeting with analysts, First Solar
on Tuesday forecast profit and revenue far in excess of most
The company said it would reduce manufacturing costs and
improve the efficiency of its solar panels dramatically over the
next four years. That, along with its strong balance sheet,
would enable the company to compete well in the market against
cheap panels made by debt-laden Chinese competitors, its
management said at the meeting.
But some investors raised concerns about the company's
expectations for bookings beyond 2013. Most of First Solar's
expected 2013 shipments are under contract, but only 40 percent
and 20 percent of forecast 2014 and 2015 volumes, respectively,
are contracted. In addition, First Solar is planning to spend
the next few years entering new, unsubsidized markets like the
Middle East, India and Chile - and said it will have to price
aggressively as it does so.
"A lot has to happen for it all to fall into place," said
Cowen and Co analyst Rob Stone, who has a "neutral" rating on
First Solar shares.
In recent months, many in the market had worried that First
Solar's pipeline of utility-scale solar projects would dwindle
as U.S. utilities meet state mandates to source a percentage of
their power from renewable sources.
"Demand has been more robust than I think a lot of people
anticipated," First Solar Chief Executive Jim Hughes said in an
interview on Tuesday.
But the company's presentation didn't eliminate those
worries entirely. Shawn Kravetz, whose hedge fund Esplanade
Capital sold calls on First Solar shares on Tuesday and shorted
the stock late in the day, said he was concerns that the
company's 550 megawatt Desert Sunlight project in California
would account for an outsized portion of earnings in 2014.
"Unless you have equally lucrative projects with which to
replace this in future years, it just means that earnings once
these juicy projects are over are going to fall," Kravetz said.
The solar manufacturing industry has suffered greatly in the
last few years as cheap Chinese panels flooded the market at the
same time key European markets were slashing subsidies. The
result was a dramatic and rapid drop in the price of solar
panels that has hurt industry profits and driven many players
out of business.
That turmoil is far from over. On Wednesday, Chinese solar
company JinkoSolar Holding Co Ltd reported its sixth
straight quarterly loss.
First Solar has benefited from generating about two-thirds
of its revenue from selling power plants to utilities, and one
analyst said he was optimistic that the company would meet its
targets given its track record of achieving cost reduction and
efficiency goals over the last five years.
"It's easy to be down on things when they are three years
away," said Ben Kallo, an analyst with Baird Equity Research. I
lean more towards them getting it done."
(Additional reporting by Swetha Gopinath in Bangalore; Editing
by Joyjeet Das and Steve Orlofsky)