AmTech’s John Hardy remains wildly positive on First Solar (FSLR). He doesn’t recommend a trade into earnings (Wednesday, July 30th, after close), but he thinks his long-term thesis is intact: the stock is going to the moon. AmTech’s focus will be on FSLR’s Malaysia plant:
The Malaysia ramp appears to be progressing ahead of the previous Frankfurt ( Oder ) ramp; KLM1 is expected to be fully ramped through 3Q08. Given the company ‘ s sold-out status, this should provide for strong 2H08 fundamentals. We view the progress of the Malaysian ramp as the most important topic for FSLR this earnings season given the associated blended cost-per-watt and shipment ramifications.
FSLR remains one of our top picks in solar given its low-cost advantage at the module level, as well as its relative lack of fundamental exposure to near-term areas of legislative concern such as Spain and the US .
The Bulls Will Point To:
- No silicon constraints as with traditional players.
- Opening of US utility market given low-cost solution.
- Little exposure to Spanish end markets.Large order backlog is creating a very serious safety net and end market as production ramp.
- The likelihood of further subsidies for the solar and alternative energy markets.
- The lack of relative exposure to alternative energy in many investment portfolios.
- The limited investment options for exposure to thin-film solar solutions.
The Bears Will Point To:
- Limited operating history.
- Must ramp production capacity very quickly in order to fulfil backlog commitments and expectations.
- Contracts in place call for a 6.5% annual reduction in pricing, making increased watts per module and operational eff iciency a necessity.
- Lower conversion efficiency versus traditional polysilicon players.
- The elimination of federal and state subsidies both in the US and abroad will do serious damage to end-user return on investment scenarios.
AmTech reiterates BUY on First Solar (FSLR), target $450.
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