SunPower Corporation (SPWR), Suntech Power Holdings Co., Ltd. (ADR) (STP): Is First Solar, Inc. (FSLR) a Good Investment?

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The solar industry at large
Like First Solar, SunPower Corporation (NASDAQ:SPWR) has seen its margins shrink as polysilicon prices have fallen. Unlike First Solar, however, SunPower Corporation (NASDAQ:SPWR) manufactures the highest efficiency solar panels on the market with over 24 percent cell conversion efficiency . This high efficiency allows for SunPower Corporation (NASDAQ:SPWR) to dominate the consumer rooftop system market where space is limited. Having entered the market in late 2011, consumer rooftop systems now make up over a quarter of SunPower Corporation (NASDAQ:SPWR)’s revenues. With the rooftop system market growing over 40% year over year, SunPower Corporation (NASDAQ:SPWR)’s future is bright.

Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) is the largest Chinese polysilicon company by volume. Unfortunately for Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), it locked in its polysilicon prices at much higher levels than the present spot price, and is unprofitable. The long term polysilicon contracts have placed an enormous debt burden on Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP). Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP)’s main Chinese subsidiary, Wuxi Suntech, defaulted on $541 million of debt in March 2013, and is in bankruptcy reorganization.  Many believe Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) will follow its subsidiary into bankruptcy as well.

The bottom line
The increasing demand for solar energy is an enormous global trend. While the solar industry has suffered from oversupply issues, First Solar, as the sector leader with a strong balance sheet, will benefit as the weaker players are shaken out. First Solar, Inc. (NASDAQ:FSLR) will not see the high operating margins as it once did, but it will be able to maintain a steady stream of profits that should please investors. In my opinion, First Solar is a good long-term investment.

The article Is First Solar a Good Investment? originally appeared on Fool.com and is written by Jay Yao.

Jay Yao has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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