First Solar, Inc. (NASDAQ:FSLR) soared last week after a more optimistic presentation than was expected at their analysts’ day on Tuesday.
After jumping almost 50% in a week, and now trading at a price that is beyond the consensus price target, is it time to take profits, or is First Solar, Inc. (NASDAQ:FSLR) just getting warmed up?
Analysts’ Day Optimism
The analysts’ day presentation by First Solar, Inc. (NASDAQ:FSLR) was much more optimistic than expected, and the good news seemed to keep coming in all day long. The first surprise was the company’s earnings guidance for the current year. Before Tuesday, the consensus was for $3.51 per share on revenue of $3.12 billion, so analysts were pleasantly surprised to hear that the company was projecting between $4 and $4.50 per share on sales of almost $4 billion.
The company discussed the results of a lot of their current projects and details about their margins. The details of these projects are too extensive to discuss thoroughly here, however virtually everything with the company is progressing better than anyone thought.
Looking ahead, First Solar projects earnings between $2.50 and $4 in 2014 and between $4 and $6 in 2015. The lower earnings in 2014 were explained as the result of financing several new projects scheduled to begin next year. After this news broke, several analysts revised their projections upward, but even after that, the consensus still sits at $3.23 and $3.91 per share in the next two years. So, if the company even produces earnings in the middle of their new projections, they will have topped the 2015 consensus by 28%. Bear in mind that even after the recent gains, First Solar, Inc. (NASDAQ:FSLR) trades for just 8.3 times forward earnings, and has over half a billion dollars in net cash on its balance sheet.
The Solar Industry: More Mainstream Than You Think
In full disclosure, I am a huge fan of the solar industry as a solution to the world’s increasing energy demands over the next several decades. I truly believe that solar energy is the clean energy source of the future, and that it will become more prevalent than wind, geothermal, and nuclear power combined. Energy experts project that world energy demand will increase from about 10 TW (Terawatts) today to about 50 TW by the year 2050. Solar is the only form of renewable, clean energy that will be practical to implement on such a large scale.
As a result, a lot of companies that are considered household names are devoting considerable time and resources to developing solar technologies in order to capitalize on this. For example, 3M Co (NYSE:MMM) formed a renewable energy division in 2009 in order to expand its solar and wind programs, which have been in existence for almost 30 years now. 3M Co (NYSE:MMM) is one of the leading producers of solar films, and just last year, the company announced that it plans to build a new manufacturing facility for its solar products in China.