Book value is less than $20 per share. First Solar produces solar cells from thin-film technology and right now has the lowest cost cells per watt which makes them a favorite purchase for utilities taking advantage of government sweetheart incentives (Germany, Spain, etc...). However, while they are currently the low-cost producer, there are some headwinds ahead. 1. Other thin-film producers are ramping-up production, such as Nanosolar and some Chinese producers. While First Solar will likely hold an advantage due to scale, this advantage may not be enough to ward off price competition which ruins margins. 2. silicon-based competitors (SunPower, SunTech, Q-cells) are going to get much lower cost of silicon in the near future, making their cells more competitive. While First Solar may again maintain low-cost status, the difference will be smaller and therefore profits and margins likely to suffer some damage. 3. Other commodities associated with energy are coming down. Oil has recently traveled from over $140 per barrel to $30. Natural Gas has also been coming down. As alternatives spark up, incentives lessen for alternative power-- especially in an economy where governments and enterprise struggle for capital under large debts. There are even more headwinds than this, but save that for later.
$152.03 (01/12/09)
