Over the past few years, the solar power industry has begun to mature and industry prices have stabilized thus, we decided to look at First Solar Inc. (NASDAQ: FSLR).
First Solar is a U.S.-based solar panel manufacturer for solar power plants. It also provides supporting services such as finance, construction, maintenance, and end-of-life recycling for these PV power plants. The share price of First Solar reached a new multi-year high in January this year, at $107.53
Although down 22% since then, we ask if First Solar stock is a good buy?
First Solar expects to have a net cash balance of between $1.8 billion to $1.9 billion on less than $3 billion in sales by the end of 2021. This is a very large margin which goes to show just how efficient First Solar has become.
In addition, the company has plans to expand its power capacity in the U.S. by 3.3.GW, which will be the largest expansion the company has carried out. This will cost around $680 million, but it will be a great addition to the company as the solar power market is in a period of dramatic growth. In 2020 alone, U.S. solar power generation grew 26%.
Indeed, First Solar's financials reflect this uptake in the market. Its Q1 earnings for 2021 saw a huge improvement with net sales coming in at $803 million, an increase of $194 million from the quarter prior, and an increase of 51% year-over-year (YoY). Earnings per share were also up from $0.85 in Q1 2020, to $1.96 for Q1 2021.
First Solar also managed to keep operating expenses low, despite the large revenue jump. Its operating expenses were $5 million fewer YoY and $18.7 million less than the prior quarter. If this trend is sustainable, then First Solar will be in an excellent financial position for huge growth over the next few years.
In other news, First Solar is not only building a solar power business to profit, but it is investing in underserved communities. In an effort to bridge the divides in different communities across America it has invested $11 million to help revitalize small communities and address inequality. This is a business that wants to give back.
First Solar, for all its apparently great qualities, has a couple of aspects that are not so promising. First and foremost is the sheer amount of competition that the company faces. Yes, the market is growing rapidly, but, with so many companies to compete with, First Solar is going to struggle to build up a strong market hold.
Furthermore, whilst the market might be growing, the amount of space available for solar farms is not, plus the land that is available could cause environmental damage. First Solar might have a lot of cash on its books, but the question remains: will this be enough to build on its land holdings in the future as it expands not only in the U.S. but also abroad?
These are important concerns for the future of any company in this growing industry.
First Solar could be a great investment, with very healthy looking financials and continued plans for expanding its solar power capacities, the company is a top contender for anyone looking to invest in this industry. Unfortunately, it is surrounded by fierce competition and despite its excellent operating margins, First Solar cannot escape the issues of land sourcing that will soon become a problem in the industry, if it isn't already.
Overall, this is a solid investment option, but investors should keep an eye on industry-level issues moving forward.
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No, First Solar does not pay a dividend, although some have suggested that it should start paying one in the future, particularly with the amount of cash it has.
Headquartered in Tempe, Arizona, the company has manufacturing facilities in Perrysburg in Ohio, Malaysia, and Vietnam.
Mark Widmar has been with First Solar since 2011; he then became the CEO in 2016. Whilst First Solar is a public company, the top stakeholder in the company is BlackRock Fund Advisors with a 9.5% ownership.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
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