Is The Time Right For First Solar, Inc. (FSLR)?

My regular readers know that I am a big fan of solar power as a long-term solution to our energy needs.  With world energy consumption forecast to quintuple by 2050, there is no other energy source that can be implemented on a grand scale that is as cost-effective as solar is becoming.

However, solar stocks have rallied very nicely from the lows of mid-2012 when all I read about was predictions of the bankruptcy of the entire solar industry!  While I concede that the solar industry is not viable quite yet without some kind of subsidies, conditions were not quite as bad as people were led to believe.

Once this was realized, the most recognizable name in the solar space, First Solar, Inc. (NASDAQ:FSLR) popped from its low of $11.43 all the way to the mid-30’s.  While I believe in the company long-term, for the time being, it may have come a bit too far too fast in my opinion.  When the company reports 2012’s earnings on Feb. 25, investors will get a nice update on the state of the industry and First Solar’s outlook on where it is heading.

The Company

Since going public in 2006, First Solar has grown its revenue very nicely (see below).  The company designs and manufactures solar modules using its proprietary thin film technology, and uses less than 1% of the semiconductor material needed to make crystalline silicon modules.

The strategy of First Solar is simple: reduce PV (photovoltaic) system costs as much as possible, and they will be appealing to more customers.  First Solar’s manufacturing costs have steadily fallen over the years, and are down to $0.73 per watt as of the end of last fiscal year.  The manufacturing costs for 2012 are definitely worth paying attention to during the earnings report.  If these costs are still steadily decreasing, the solar industry will be able to stand on its own quicker.

The Solar Industry

The general consensus now seems to be that eventually solar will become a widespread source of energy.  With the bankruptcy of Solyndra, the industry got the reputation of being made up of small, unstable companies.  However, the solar industry in general is more popular and mainstream than you may think, as many of the “big boys” have been developing solar equipment for some time now.

Two companies with particularly ambitious solar operations are General Electric Company (NYSE:GE) and 3M Co (NYSE:MMM), and these may actually be a good way to play the solar industry and ride out the uncertainty ahead.