First Solar (FSLR) is still the king of solar, with a market cap around $20 billion. But one of the most signficant risks is increased competition. That 90 P/E isn’t just discounting next year’s sales.
Any competitive threats could clobber the stock. After visiting with companies at the Valencia Solar Trade Show, Deutsche Bank is positive about FSLR’s current competitive position, but it’s clear (to us, anyway) that troubles may be brewing. So we think it’s time for First Solar to start putting that humongous market cap to use, by snapping some of those smaller fish up.
We met with several CIGS [Copper indium gallium selenide] based companies at the show; the most advanced appears to be Wurth Solar, with potentially well over 10% module efficiency [FSLR module efficiency is 10.7% and steadily improving] and expectations of ~20MW of production in 2008 [FSLR has guided 470-485MW of shipments for FY08]. [Wurth’s] ramp plans, however, are uncertain, and without scale, even such good apparent metrics will not hinder First Solar.
We believe the most advanced CIGS companies are Wurth and Showa Shell (i.e. with respect to production and claimed performance), but noting Showa Shell’s ramp plans to 80MWp of capacity by end‐09, we do not see a looming competitive threat to First Solar’s CdTe [Cadmium Telluride] modules any time soon. Furthermore, we do not expect to see dual junction amorphous silicon product until well into 2009.
Translation: The threat isn’t “looming”, but it’s there. With heavyweights like General Electric (GE) (Primestar Solar) entering the thin-flim solar module game, moreover, the biggest threats are yet to come.
Deutsche reiterates BUY on First Solar (FSLR), target $330.
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