First Solar Inc

-2.03 (-0.94%)
7:59:27 PM EDT: $211.95 -1.37 (-0.64%)
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Who Will Win the Solar Wars?

Solar and other renewable energy is part of a massive social and economic trend that is reforming not only the energy sector, but large portions of the global economy. The story of solar is at the intersection of technology, politics, popular culture, and entrenched industries. Time to shed some light on the companies trying to change the world.

Solar energy production is growing massively world-wide. The race to become the dominant producer has been a pitched battle with numerous casualties.
"In the USA, two major solar companies which in 2009 had been among the top in the world, Solyndra in California and Evergreen Solar in Massachusetts [7] [9], filed for bankruptcy in 2011 [8]."
Chinese companies have spurred the industry forward by driving the production costs of solar panels sharply downward. The resulting market has been difficult for companies in higher-wage economies to compete with. In fact, even the Chinese manufacturers may have been too aggressive in their pricing. Four Chinese solar energy companies have now failed to make bond payments on debt they've wracked up, according to Bloomberg:
"A venture of Yingli Green Energy Holding Co., the top producer of panels until 2014, missed payments on 1.76 billion yuan of its notes. That brings the number of companies that defaulted on bonds to four, involving $1.8 billion..."
A few have managed to fight on, and some of these have come out stronger on the far side.

First Solar (NASDAQ:FSLR) stock came under fire from investors after missing revenue by 13% verse consensus estimates. The stock has been driven down about 20% to $48.56 in the last two weeks since the announcement.

The long-term trend for First Solar still looks quite positive, however. CML Pro gives us First Solar's revenue and profit history to dispel the cloud hanging over them. The revenue bars are shown in blue and represent that last 12 months of revenue instead of just the current quarterly revenue, to give a clearer picture. The orange line is the last twelve month's earnings:

The reason for the missed revenue? Timing of projects, not a decrease in real sales.
"For Q1 net sales were 848 million in the quarter compared to 942 million in Q4. The decrease in sales results are primarily from the timing of revenue recognition across multiple systems projects and the completion during the quarter of our Tenaska West and Southern projects."
Revenue forecasts remained unchanged and profit forecasts increased do to improved margins. This isn't the first time FSLR has been, seemingly wrongly, punished for delayed sales. A similar announcement was made in early 2013 that drove First Solar stock down to $25.35, which proved to be the low point in a 2 month rally that took the stock back over $50.

SolarCity (NASDAQ:SCTY) has been struggling after Nevada changed its net-metering policy. In short, the energy that SolarCity produces during the day that it doesn't need, it sells back to the utilities. Until the law was changed, the energy was sold back to the utility at the same price that the consumer bought electricity for during the night when they needed it. The net-metering change means that the energy that gets sold back during the day is sold at the price it costs the utility to produce the energy, the "wholesale" cost. This makes the economics of installing solar panels much less attractive for consumers, and as a result, SolarCity has effectively pulled out of Nevada.

Here's what's happened to the SolarCity stock as a result:

One company benefits from the net-metering change, however. And, fortunately for Elon Musk, who is SolarCity's largest shareholder, the company that is helped is a company of his that is even more valuable, Tesla (NASDAQ:TSLA).

The reason is straight forward: Tesla sells batteries large enough to power houses and even larger commercial businesses. Now that the economics of selling power back to utilities have been hurt, the economics of storing the power locally have been substantially helped. That's exactly why Tesla invested billions into these state-of-the-art factories:

It's been widely reported that Apple (NASDAQ:AAPL) is building an electric car. They've hired automotive and battery engineers from across the industry. They've filed automotive patents. Tim Cook is reported to have toward the manufacturing floor of BMW's i3.

Google (NASDAQ:GOOG), meanwhile, has had a very high profile self-driving car project clocking millions of miles all around the country.

If these two tech giants follow through with their plans toward electric, and self-driving cars, where will they get the lithium ion batteries to power them? Laptop and camera manufactures can't possible handle that kind of demand. Either they are going to have to build massive battery manufacturing facilities of their own, or they will have to buy them from Tesla.

Solar and renewable energy are huge trends that will change much of how we live, and while our research pieces provide in depth coverage of who is likely to dominate this theme, this is only one of CML Pro's precious 'Top Picks.' To find the 'next Apple' or 'next Google' we have to get ahead of the curve. This is what CML Pro does. Our research sits side-by-side with Goldman Sachs, Morgan Stanley and the rest on professional terminals, but we are the anti-institution and break the information advantage the top 1% have.

Each company in our 'Top Picks' is the single winner in an exploding thematic shift like artificial intelligence, Internet of Things, drones, biotech and more. In fact, here are just two of the trends that will radically affect the future that we are ahead of:

The Internet of Things (IoT) market will be measured in trillions of dollars as of next year. CML Pro has named the top two companies that will benefit. Then there's cyber security:

Market correction or not, recession or not, the growth in this area is a near certainty, even if projections come down, this is happening. CML Pro has named the single best cyber security stock to benefit from this theme.

These are just two of the themes we have identified and this is just one of the fantastic reports CML Pro members get along with all the visual tools, the precious few thematic top picks for 2016, research dossiers and alerts. For a limited time we are offering CML Pro at a 90% discount for $10/mo. with a lifetime guaranteed rate. Join Us: Get the most advanced premium research delivered to your inbox along with access to visual tools and data that until now has only been made available to the top 1%.

Thanks for reading, friends.

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