Stepping into the light of First Solar
- First Solar joins list of top 40 global Alpha Picks
- Despite Q2 earnings downside revision, underlying fundamentals are robust
- Improved thin-film technology has helped efficiency
- Government-backed solar energy projects put the sector in favourable position
- See PDF for complete list of this month's Alpha Picks
Making the most of the sun. Photo: iStock
By Peter Garnry
First Solar (FSLR:xnas) has joined the top 40 global list of Alpha Picks across the largest global equities this month following a 25% decline post the company’s second-quarter earnings that revised down the outlook.
First Solar’s Q2 result was actually quite robust with trailing revenue up 23% year-on-year and the trailing EBITDA margin is 26%, up from around 21% a year ago. In addition to improved fundamentals, the company is beginning to shift away from utility-scale projects (around 61% of revenue in 2015) and back to panels as back in 2011.
The driver behind this move is the increased efficiency of First Solar’s thin-film technology now reaching 16.2% in Q2 close to par with multiple silicon solar panels.
First Solar weekly share price since Q3 2011
Source: Saxo Bank
First Solar may now be stepping into the limelight with some very obvious negative price momentum, but underlying fundamentals are improving and major governments around the world are committed to solar energy boosting demand through subsidised incentives.
All Alpha Picks across Global, North America, Europe and APAC & EM can be found in the attached PDF.
— Edited by Martin O'Rourke
Peter Garnry is head of equities strategy at Saxo Bank