First Solar: Is the momentum finally gone?
Amazing turn of events for First Solar today.
Goldman Sachs initiated coverage on First Solar (FSLR) with a ‘Buy’ rating and six month price target of $125. Goldman Sachs analyst, Michael Molnar, said he’s bullish on the solar sector for the next six months, as he expects increasing demand relative to supply and news on continued government support of solar energy efforts. However, he further went on to state that solar oversupply is possible in mid-to-late 2008 but believes in an oversupply situation, he prefers First Solar because of its manufacturing efficiencies and low production costs.
With Crude Oil hitting $80 today, this was a perfect day for First Solar to rocket and not look back. The stock was up pretty nicely in pre-market as you would expect on the upgrade. In the past an upgrade such as this (after all, it was Goldman Sachs) would have sent First Solar to the stratosphere. However, First Solar closed the day down almost 4%.
The stock closed yesterday at $102.19, opened today at $105.50, went as high as $108.51 but closed the day at $98.13.
Today’s price action was a total shock to me. I have been following this stock since late last year and got burned pretty bad shorting it. Since then, I have been able to recover most of my losses.
So is the stock finally loosing momentum? Was there some other factor involved that I am not aware of? Maybe we look back at this day as the start of a downtrend in First Solar? But then again this could be a total non-factor and doesn’t mean anything. Trust me, anything is possible when it comes to First Solar. Let’s see what tomorrow brings.
Either way, I have been adding additional Puts and will continue to do so in the near term.
By the way the comment by Goldman Sachs, solar oversupply is possible in mid-to-late 2008, can’t be good for the overall Solar sector.
* I am short First Solar (FSLR)
September 13th, 2007 at 2:49 pm
This is a useful story for day traders. However, for the rest of us I think the pulse is quickening on US commercial use of solar. Until very recently all the news was from the EU, now a steady stream of solar projects are being announced in Calif. I sense a flood coming on and this is one of those times that Calif trend setting is for the good.
September 13th, 2007 at 10:03 pm
I made some money off of First Solar back in the $50-$75 range, but now I just own 6 shares (woohoo!).
I still wouldn’t be betting against First Solar, they’re in a class by themselves, and they have tremendously powerful people behind them.
According to my idea of the ideal future situation, the supply glut will be accompanied by US Federal supports on the demand side (added to increasing levels of state support). It’s also very likely that as prices come down on increasing supply, countries like China are going to go balls-to-the-wall for the stuff, which will eat up alot of the supply from the Chinese factories, at least.
I’d say that First Solar has no threatening competitors right now. They will have competition eventually, probably coming out of research being done right now, but they’ve gotten the jump on the competition, and are getting ready to burst forward.
Thinking about it, I’m wondering if AMAT might be their most immediate competition with their “SunFab Thin Film Line.”
September 13th, 2007 at 10:18 pm
I sort of agree with both of your view points here but I still think First Solar will probably go in $70 range in the near term.
Just look at the amount of Insider selling. The have no sales in US as far as I can recall. Sunpower would be the call if you want to take advantage of California. First Solar panels can’t be used on rooftops. There are some environmental and total life of the panel issue as well.
I think its a good company but the stock has gotten way ahead of itself. Plus I am bearish as far as the overall market is concerned as well right now. If the market does go bearish stocks such as these will be affected the most.