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The Rain Keeps Falling for First Solar, Inc. (NASDAQ:FSLR)

First Solar, Inc. (NASDAQ:FSLR) dropped its Q3 results last week. And the stock was dropped in response to the data. One wonders whether or not there was a kitchen sink in the rubble given the dramatic weakness we have seen here.

In raw terms, EPS came in at $0.54, was down sharply from the prior year period’s $1.95 EPS but nevertheless well above market expectations. However, revenue fell 37.8% year/year to $676.2 mln, which was below market expectations. As for 2018 guidance, FSLR lowered EPS guidance to $1.40-1.60 from $1.50-1.90. It also lowered revenue guidance to $2.3-2.4 bln from $2.5-2.6 bln.

First Solar, Inc. (NASDAQ:FSLR) frames itself as a supplier of PV solar modules. In fact, it identifies itself as the world’s largest thin-film PV solar module manufacturer and one of the world’s largest PV solar module manufacturers.

The company’s thin-film technology is cheaper to make and generates more solar electricity than a number of its competitors, up to 8% more energy than conventional crystalline silicon solar panels for the same nameplate watts capacity.

On the product innovation front, FSLR recently launched its Series 6 module technology, which the company touts as a significant improvement in solar technology. Series 6 has a combination of high conversion efficiencies, low manufacturing costs, larger form factor, and balance of systems component compatibility. FSLR expects that its transition to Series 6 module technology will enable the company to maximize the intrinsic cost advantage of CdTe thin film technology vs crystalline silicon.

Specifically, its Series 6 PV modules deliver the highest power output for large-scale solar projects, significantly more energy per watt installed than conventional silicon modules in many climates. Its delivers more watts per connection (420+ watts) than 72-cell silicon modules (<400 watts).

It also offers reduced shipping costs; its under-mount frame is designed to enable a horizontal stacking configuration, which optimizes shipping density, reduces breakage, and minimizes waste. It also requires lesser maintenance costs than other industry models as its under-mount frame promotes natural snow shedding and rainfall cleaning.

 

Looking for some Blue Skies

As noted above, FSLR turned in another troubling report card, missing badly on revs and dropping Q4 guidance on both the top and bottom.

If there is a bright spot in there, FSLR has started the first commercial shipments of Series 6 from its factory in Vietnam, and progress to date on the initial ramp has been good. Commercially, FSLR continues to be pleased with strong demand for its technology, as evidenced by net bookings of 1.1 gigawatts since its last earnings call.

FSLR has booked over 1.6 gigawatts since the May 31 solar policy change in China.

Probably the most interesting analyst commentary came from Cascend Security. The firm said it is “keeping to its strategy of letting fundamental data tell it what to do, rather than forcing it’s opinion onto the data: Firm’s solar supply chain indicator last month saw the worst decline in a decade, after four big declines. Cascend continues to see massive overcapacity in the solar supply chain globally. FSLR Sales would have been even lower in 3Q18 if not for closing sales of the Willow Springs project (U.S.), the Manildra project (Australia) and some Japan assets, and recognizing higher revenue from the California Flats project in the Q. FSLR now sees lower expected module sales, higher manufacturing ramp costs and expectation that the Ishikawa project in Japan will now be sold in 2019. ASPs saw a 10% decline in the 3Q18, but pricing in some markets is very aggressive. There is a real concern that because module pricing in general has come down so much in the industry, a meaningful portion of FSLR’s enormous backlog could be at risk for cancellation.”

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