But First Solar, Inc. (NASDAQ:FSLR) is at an advantage due to its large-scale production facilities and manufacturing processes which allow for significant cost reductions and competitive pricing. I don’t think that many smaller companies would be able to stay afloat in the hyper-competitive industry of solar. This leads me to believe that there could be plenty of strategic merger and acquisition activity amongst these small solar manufacturers.
In order to boost its global market share and extend its lead, First Solar, Inc. (NASDAQ:FSLR) is aiming for a 25% market share in India over the next 3 years. On the growth front, First Solar, Inc. (NASDAQ:FSLR) continues to benefit from its agreement with SolarCity Corp (NASDAQ:SCTY).
Solar energy
SolarCity Corp (NASDAQ:SCTY) is one of the leading “green companies” that leases solar power systems for domestic consumption. The company has tied up with First Solar, Inc. (NASDAQ:FSLR) for solar panels, so both the companies stand to benefit with every sale by SolarCity. As a result of this strategic venture, SolarCity has quickly become the market leader in the residential solar leasing business with a market share of 10.2% (calculated by new systems installed in 2012).
On the growth front, I believe that there’s still a lot to be achieved. As of now, SolarCity’s modules need charging during daytime and discharge electricity during night. As a result, SolarCity has temporarily tied up with electric utilities to provide electricity to its customers during daytime. This has been a major deterrent for the adoption of its solar modules.
In 2013, however, SolarCity is planning to provide uninterrupted solar electricity to its customers. The company recently announced that it will add 250 MW of electric capacity in 2013, eventually eliminating the role of electric utilities. As of now, SolarCity is operating with a total capacity around 150 MW, and an addition of 100 MW will play a vital role in increasing its consumer base.
Final words
In retrospect, all three companies have enjoyed a meteoric growth over the last couple of years. Shares of Tesla Motors, First Solar and SolarCity have more than tripled over the last year, which have taken Tesla and SolarCity to ridiculously high valuations.
It should also be noted that the industries of domestic solar panels and electric cars are largely unregulated, however. Any future policy changes or government intervention could potentially destroy their growth prospects. Another risk comes from market speculation and hype, which makes these stocks more volatile (high beta).
Stocks having high beta values suggests that they will be more volatile as compared to benchmark indices. Aside from holding the above-mentioned stocks, I believe that investors should also consider investing in low beta stocks to lower their overall risk exposure.
The article Buy These Green Stocks for High Returns originally appeared on Fool.com.
Piyush Arora has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors. Piyush is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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