AP
First Solar Results Spark Industry Rally
Wednesday February 13, 7:45 pm ET
By Chris Kahn, AP Business Writer
Solar Power Industry Shares Surge on Wall Street As First Solar Q4 Results Shine
PHOENIX (AP) -- The solar power industry is experiencing a surge on Wall Street despite fears of a recession as some companies increase production, cut costs and vow to be competitive with conventional electricity in the next few years.
On Wednesday, Phoenix-based solar modules maker First Solar Inc. said its fourth-quarter earnings skyrocketed as the company boosted production.
It posted earnings of $62.9 million, or 77 cents per share, compared with $8 million, or 12 cents per share, in the year-ago quarter. Revenue almost quadrupled to $200.8 million, from $52.7 million in the 2006 period.
The results beat Wall Street's expectations and First Solar's shares jumped $52.90, or 30 percent, to $228.46 in Wednesday trading.
Other solar-power stocks followed its lead. Yingli Green Energy Holding Co. rose $3.44, or 17 percent, to $24.19; JA Solar Holdings Co. rose $2.93, or 17 percent, to $20.34; Canadian Solar Inc. rose $2.60, or 13 percent, to $22.80; and Evergreen Solar Inc. rose $1.23, or 12 percent, to $11.34.
"Our 2007 results increased our position as the low-cost leader in the industry and brought us closer to achieving price points that make solar electricity viable," without significant government subsidies, First Solar chief executive Mike Ahearn said in a conference call with analysts.
Solar power still amounts to less than 1 percent of the total generated electricity in the U.S. through October 2007, according to the Energy Information Administration. But analysts say to expect its share to rise as governments look to reduce their dependence on foreign energy while dealing with higher prices for traditional power sources.
Worldwide concern over global climate change also has fueled a tremendous amount of support for renewable energy sources like solar, said John Hardy, an analyst with American Technology Research.
"Ten years ago, green was sort of the idea of a few tree huggers in Northern California," Hardy said. "Now, being green has taken on a more widespread appeal."
In the United States, new solar power installations rose from 49 megawatts in 2002 to 314 megawatts last year, according to the Solar Energy Industries Association. One megawatt is enough to power 778 average homes, according to the Energy Department.
Investors, however, recently turned away from solar stocks as they looked to get rid of riskier holdings in preparation for a possible U.S. recession.
First Solar, however, is less vulnerable to the American economy because of its international clientele. It's unexpectedly high profit this quarter, combined with increasing its 2008 revenue guidance about 18 percent, showed that the industry was still a good bet, Hardy said.
The company expects revenue to rise sharply this year to a range of $900 million to $950 million, from $504 million in 2007 and prior estimates of $760 million to $800 million.
First Solar predicted an operating margin between 25 percent and 27 percent of sales.
Cowen and Company analyst Rob Stone reiterated an "outperform" rating on First Solar's shares in a note Wednesday. He cited the company's low-cost structure, high profit margins and his expectation of a "good, persistent upward trend" in stock value over the next year. Lehman Brothers analyst Vishal Shah said the company's lower costs per watt and higher production suggest that First Solar is "operating comfortably above" its long-term targets.
First Solar, which formed nine years ago and had its initial public offering in 2006, has focused on low-cost, thin-film cells. They're not as efficient as more expensive silicon-based cells, and therefore not suitable for home use on neighborhood rooftops.
First Solar instead markets its products exclusively for commercial use in areas with lots of sunshine and enough space to support an array of large panels.
Calyon Securities analyst Kelly A. Dougherty said the company is an industry favorite because it isn't affected by global polysilicon supplies and it's able to make affordable solar panels.
"They are much lower cost than anyone else in the industry," Dougherty said.
First Solar said it will reach cost parity with traditional electricity in two to four years. "From what we're hearing that's not a bad number," she said.
On Wednesday, company officials said its earnings were helped by full production capacity at its German plant, with increased efficiency and lower manufacturing costs.
For the full-year, the First Solar posted profit of $158.4 million, or $2.03 per share, compared with $4 million, or 7 cents per share, in 2006. Revenue jumped to $504 million, from $135 million a year earlier.
Analysts predicted earnings of $1.19 per share on sales of $483.4 million for the year.
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