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First Solar, Inc. Message Board

  • lt_capital lt_capital Dec 13, 2012 1:11 PM Flag

    Reasons FSLR should be valued at well above $100 today

    Here are the reasons I'm a strong bull...

    What we know:
    1) FSLR has already told us they have 3GW of backlog and PPAs. Their estimate is that this represents approximately $8.9B in future revenue. But we also know they have seen their margins shrinking and the question is what is the margin on that $8.9B in future revenue. When you review their conference calls they have indirectly told us what the margins are on that $8.9B. Specifically they have told us that there are $3.4B in "gross cash receipts" still to come in. This is cash net of direct costs. However, it also includes cash for revenue already recognized which can be taken from the balance sheet. Between accounts receivable billed and unbilled they currently have 867M in cash to come in. Removing that from our $3.4B in expected cash receipts of $3.4B which indicates there is approximately $2.5B in gross receipts (ie Gross profit) on the remaing $8.9B of future revenue flow. This gives us a Gross Margin of 28%. We know from 3Q results that at 28% they were running over 10% on net margin. If we assume that the 8.9 splits evenly over 2013 and 2014 then we should expect approximately 4.5B in revenue in 2013 which at 10% Margin would be 450M in profit or 5.29/shr in profit

    2) Overall analyst estimate are for growth of 25% for FSLR over the next 5 years so applying a PE of 25 would be reasonable (see: http://finance.yahoo.com/q/ae?s=FSLR+Analyst+Estimates) which would give us a value of $132.25

    3) Even at current analyst estimates the PEG ratio is .27 which implies (if we give it a PEG of one) that the stock price should be $118/shr

    4) In my view FLSR will be a classic case of "reversion to the mean". FSLR deviated because of the heavy panic selling due to changes in the Solar market primarily in Europe do to their fiscal problems. However, the market didn't anticipate that while Europe was going to buy less there would be offsetting changes in other parts of the world which would continue to drive growth in the market. If you look at the mean price of FSLR over the past five years and average the monthly close price going back 5 years (INCLUDING the last year of low prices) the average is $123/shr

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    • Bump

    • 3 months ago I calculated the GP on the backlog at that time. That has proven to be accurate through 4Q earnings and 1Q forecast. Anyone could have updated the calcs that I did and know what was going to happen today. The only unknown was the revenue for 2013. And anyone could have taken a rough guess at what that was going to be. Frankly trying to share useful info on this board is pretty well impossible with people like dimeboy posting 30 negative posts at every turn regardless of the info provided. The facts haven't changed.....in fact with more cliarity on the roadmap the journey has only become more clear.

    • If you are going to use this as a reason to buy the stock then you should first short AMZN as it has a 180 PE ratio and its profit margin is 1.9%. And yet, AMZN keeps going up.

      These days, with computers doing most of the trading, you need to be careful in trading off of fundamentals. The game has changed.

    • Chile, Mexico just add to the reasons why FSLR should be well above $100. Looks like this could be a replay of that Netflix movie from last week. :-)

    • Interesting comparing numbers from Netflix.....
      _____________________________________________

      Netflix
      _____________________________________________

      FY Rev $3.6B up 12% YTY
      FY EPS 16cents down 93%

      Market Cap at close $5.74B
      After hours +$35 increasing market cap to $7.7B

      PE at close 338, after close 448 (must kill dimondboy given he doesn't believe in PE's above 25)
      ____________________________________________

      First Solar (analyst avg esimates from Yahoo)
      _____________________________________________

      FY Rev $3.6B up 30% YTY
      FY EPS $4.62

      Market Cap at close $2.71B

      PE of 7

      Now for every $10 that FSLR goes up shorts lose about $220 million. A $40 increase would be close to a $1 billion loss. I'm sleeping well at night.

    • Stop talking and buy a few thousand shares, heck buy 1 million!

    • bump

    • 4 weeks until we hear what FSLR has to say......going to be a lot of pressue on the shorts.

    • Will say comical article this weekend. love the old "covered" quote. funny I remember saying to sell at $13. must be wrong. :) IMO

    • OK...I'm going to post point by point responses on the SA article by Sneha Shah. This article appears to intentionlly bend the truth to suit it's thesis. I'll start with probably the pivot point of the article...that it is FSLR uncompetitive costs which make it a short opportunity. The article comes up with two central points on the costs: 1) that the "processing" cost on polysilicon solar has gone down to 47 cents and 2) that FSLR is "stuck" at 65 cents.

      First off, his statements are only a partly true. If you read the latest material from CSIQ, JKS and TSL you'll find that NONE of them had overall cost under 59cents per watt (67cents, 59cents and 64cents repectively). Meanwhile, FSLR's 3Q costs were 67cents down 5cents QTQ (not exactly "stuck") and if you remove underutilization they were at 62 cents. Furthermore, if you strip out other overheads (stock based comp, frieght etc.) their core cost per watt is 53cents. However, in my view, more important than cost per watt, on the bottom line in 3Q FSLR had a gross margin of 28%, whereas the Chinese manufacturers were at 1%, 9% and 2% margin respectively. So if the Chinese manufacturing costs are believed they have somehow squandered that advantage at the overall level. Moreover, FSLR has been coming back on it's margins since 1Q where it bottomed out at 15% then went to 23% then 28%. The Chinese manufacturers haven't.

      So I agree with his premise "it's the costs stupid", my conclusion is FSLR has the advantage. In fact, as I've pointed out in the previous posts in this thread their margin on current backlog is in the range of 28% for the next two years. I'm not sure these Chinese manufacturers can say the same thing.

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