General Electric Company (GE), Trina Solar Limited (ADR) (TSL): The Future Is Dimming for First Solar, Inc. (FSLR) Stock

Is First Solar stock a buy?
It’s hard to argue with First Solar’s balance sheet, with $1.3 billion in cash and marketable securities versus $309 million in debt. After generating $168 million in free cash flow last quarter, the stable balance sheet is getting better, for now.

First Solar’s problems are more strategic than immediate. Costs for all of its major competitors’ modules are falling faster than First Solar’s own costs and the company makes a product with inferior efficiency that is only viable in utility-scale projects, not the growing residential and commercial market. I don’t think acquiring General Electric Company (NYSE:GE)’s thin-film technology will make a major difference either.

What is scary for the company is the next generation of polysilicon equipment that will hit the market. Equipment that will allow low-cost manufacturing of 20% or greater efficient panels should be introduced in the next year or two, and then First Solar will fall further behind. The only way to keep up in the panel business would be to build out its TetraSun technology, acquired earlier this year. But that’s risky and would cost hundreds of millions of dollars to build at scale.

Foolish bottom line
First Solar, Inc. (NASDAQ:FSLR) is in a weak strategic position and in need of major technology changes just to keep up in the solar panel business. If the company jettisoned its module business and specialized in solar systems the stock could become a value, but not in its current state. I think financials will continue to deteriorate until First Solar realizes that its advantage is in building solar projects, not building the panels that gave it an advantage in the early 2000s. Those days are long gone.

The article The Future Is Dimming for First Solar Stock originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company.

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