First Solar, Inc. (FSLR), SunPower Corporation (SPWR): Solar Power Comes of Age, But Will Investors Benefit?

Even more intriguing is that TetraSun’s technology is based upon the very common silicone system that First Solar, Inc. (NASDAQ:FSLR) rejected in its flat panel systems. As of this writing, TetraSun does not have a market presence. But, this could present a real sea change for First Solar, Inc. (NASDAQ:FSLR). If the Japanese rooftop business proves successful for First Solar, it is likely the company would work to expand that business beyond Japan.

Otherwise, First Solar, Inc. (NASDAQ:FSLR) had a solid, though not spectacular 2012. Net sales of $3.4 billion were up 22% from 2011. Profits, excluding restructuring charges, came to $430 million, or $4.90 per share. At the company’s April 9, 2013, analyst meeting, it pointed out that due to its modest debt level of just 12% of capitalization, it is the only large solar manufacturer with a “positive cash position.”

Well, that is nice, but that alone won’t make a solar maker profitable in these days of cut-throat competition. In 2013, the company expects revenue of about $3.9 billion and earnings of about $4.25 per share. It sees income in 2015 reaching as high as $6 per share.

What I see is nothing special, until and unless the TetraSun purchase yields fruit. If First Solar can continue its high volume utility scale business, and also add a higher margin roof top business to the table, then the sky will be the limit. We are likely years from that happening, and First Solar, Inc. (NASDAQ:FSLR)’s stock, which has jumped some 40% on the afterglow of the TetraSun deal, is now probably overvalued based on 2013 – 2014 earnings. I would look elsewhere.

Another big solar provider in this country is California-based SunPower Corporation (NASDAQ:SPWR). It boosts market leading performance of 21.5% efficiency, but at a cost of having its solar prices undercut by Chinese competition. As a result, the company has not been profitable since 2010, and losses since have reduced the company’s book value by 50% over the past three years.

Frankly, things do not look any better this year or next, but SunPower Corporation (NASDAQ:SPWR) has an “ace in the hole” as it is majority owned by French energy giant TOTAL S.A. (ADR) (NYSE:TOT). The backing of the resources of one of the world’s energy giants gives SunPower Corporation (NASDAQ:SPWR) financial stability, but the question is, for how long is Total willing to withstand losses.

Solar panel prices will turn around when demand and supply come back into whack, but that won’t be any sooner than late 2014 to 2015. Until then, I would avoid this issue along with other solar panel manufacturers.

The article Solar Power Comes of Age: Will Investors Benefit? originally appeared on Fool.com is written by Bill Edson.

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