First Solar, Inc. (NASDAQ:FSLR)
Typically when companies forecast lower sales or profits, their stocks usually take a hit. It’s not always easy to tell whether it’s having a fire sale or burning down its house. Maybe it is time to get out — or maybe it’s time to buy more!
In the case of solar-module maker First Solar, Inc. (NASDAQ:FSLR) , I think it’s time to grab your belongings and head for the exits. Even though it was able to beat analyst profit expectations for the fourth quarter, it still fell far short on revenues, missing by about $150 million or so. And with its first-quarter outlook looking dismal — it guided to revenues of just $650 million to $750 million, far below Wall Street’s $822 million guess — there’s no reason to be optimistic that there’s a turnaround in its future.
Cloudy skies
The problem is that First Solar was no longer happy being a module shop. It thought that operating on a grand scale of becoming a design-build construction firm for utility-scale solar power plants was where the growth would be, but there’s precious little going on there, either.
The company had 3 gigawatts of projects in its pipeline during the third quarter, but that fell to 2.9 gigawatts by the fourth, which, when you account for those it can’t yet recognize revenue on, leaves just 2.2 gigawatts in the pipeline. For all of 2012, First Solar, Inc. (NASDAQ:FSLR) recorded just 1.1 gigawatts of new bookings, and factoring in the 1.4 gigawatts of shipments it had, gives it a book-to-bill ratio of 0.8 when what it should be targeting at the very least is a one-to-one.
First Solar can’t even begin to think about giving full-year guidance until after the second quarter is put to rest, because two projects — the 300-megawatt Stateline Solar Farm in California and the 250-megawatt Silver State South project in Nevada — have yet to be permitted, and trade disputes between the U.S. and India and China and Europe remain ongoing. Until all those are ironed out, or at least more clarity is provided, the solar shop has no idea how its business will fare.
Of course, we still need to dig a bit further, so don’t blindly sell on these bearish signals. We’ll just use the announcement as a jumping-off point for additional research.
Like lemmings over the cliff
It’s no surprise why First Solar wanted to minimize its exposure to the module market. Depressed pricing from the continuing inventory glut is crushing everyone from ReneSola Ltd. (ADR) (NYSE:SOL) to Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) .
ReneSola reported earnings last week that showed it recording its sixth consecutive quarterly loss, which widened to $50 million from the nearly $37 million loss it posted last year. As a recent Reuters story noted, solar panel prices plunged 30% in 2012 on top of a 30% tumble the year before that .
Suntech is so beaten up that it defaulted on $541 million in bond payments that were due on Friday. I noted the other day that LDK Solar Co., Ltd (ADR) (NYSE:LDK), JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) , and Trina Solar Limited (ADR) (NYSE:TSL) are all in positions similar to Suntech, because they each have large bond payments coming due within the next year.
