First Solar, Inc. (FSLR) Lowers the Bar: Fluor Corporation (NEW) (FLR), ReneSola Ltd. (ADR) (SOL)

Designing a way out
To its credit, First Solar, Inc. (NASDAQ:FSLR) has a pretty strong balance sheet, but how long that will last is questionable. Margins are set to deteriorate as management highlighted the pricing competition it’s facing on the system side of its business. It’s not so much that module makers are following suit and jumping into the EPC business — although that’s happening, too — but rather it’s that traditional design-build specialists such as Fluor Corporation (NEW) (NYSE:FLR) , which won contracts for solar parks in California and Arizona last year, are moving in and winning contracts. Large-scale solar projects may be where the money is, but everyone is moving.

First Solar has maintained its profitability thus far, but that probably will end soon, or in a greatly diminished form. This year shows substantial cracks in the foundation, and as margins wither, the solar shop’s depleted pipeline will add more pressure, and I suspect we’ll see its stock fall precipitously. I don’t think the various financial ratios that depict First Solar as a discounted value play take into consideration this darkening future.

Low pricing, low margins, empty pipelines, and greater competition are a tough mix to go up against. I’ve had a long-running “underperform” rating on First Solar on Motley Fool CAPS that I don’t plan on closing out anytime soon.

Despite decades of subsidies and innovation, solar power is really nowhere in meeting our energy needs and undoubtedly will never amount to much regardless of the money thrown its way. But disabuse me of that notion in the comments box below if you think there’s a reason First Solar, Inc. (NASDAQ:FSLR) will be the first in its class once again.

The article First Solar Lowers the Bar originally appeared on Fool.com and is written by  Rich Duprey.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of Fluor.

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