First Solar: Renewable Play with Safety Characteristics

10/01/2018 5:00 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

Companies in the renewable energy space are solid choices in today’s market. They offer some upside while having safety characteristics that will protect you if the market suffers a downturn, notes growth stock expert Stephen Leeb, editor of The Complete Investor.

First Solar (FSLR) is a stock we’ve followed for a long time. While often quite volatile, it also has a lot of safety characteristics. Profits have been inconsistent partly because of increased capital expenditures and partly because of lower sales as cheap Chinese panels continue to dominate the market.

But First Solar’s abundant liquidity offers a buffer against potentially weaker economic conditions: Its net cash position — cash net of debt — is about half of its market cap.

The company’s Series 6 panels, launched in 2017, lower the installed cost per watt considerably, making First Solar one of the best-positioned U.S. companies to compete against China’s low-priced panels. Reducing costs is critical in this highly competitive industry, and the Series 6 is a big step in that direction.

Bookings have been strong, and the company has backlogs totaling about 11 gigawatts. About 80% of its available supply is already under contract through 2020.

Industry uncertainty is high as competition is stiff, but First Solar has held onto its module efficiency advantage — the percentage of sunlight converted into energy — and its strong balance sheet should give it the flexibility to continue to invest and innovate.

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