It was once one of the brightest lights in alternative energy. But the future has dimmed for First Solar (symbol FSLR), the nation’s largest producer of photovoltaic equipment.
SEE ALSO: Slide Show: How to Be a Better Stock Investor
The once-hot stock, which traded for as much as $317 a share in May 2008, fetched just $35 on January 6. Its descent accelerated in 2011 after the Tempe, Ariz., company ousted its CEO and started cutting earnings forecasts late in the year. It now sees a profit of $3.75 to $4.25 per share this year—roughly half of what it was expected to have made in 2011. The stock (which we recommended in our June 2009 issue at $142) now trades at just 9 times the midpoint of the forecasted-earnings range.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Yet even at this seemingly bargain-basement price, few analysts are bullish. There are just too many uncertainties facing the industry and the company, says Citi Investment Research analyst Timothy Arcuri, who rates the stock a “hold.”
“Developing solar projects is very capital-intensive, and the payback is a little unclear,” he says.
Also weighing on the stock: expiring subsidies for clean energy. First Solar had been growing at a rapid clip, thanks largely to subsidies from various governments. Such support made it feasible for both industry and utilities to build massive solar farms, even though it costs much more to produce a kilowatt of energy from solar power than from fossil fuels. The subsidies were particularly generous in Germany, which accounted for roughly half of First Solar’s sales, but that program expired at the end of 2011. Similar programs in France, Italy and the U.S.—other major markets for First Solar’s energy farms—are expiring over the next five years. Meanwhile, cutthroat competition from providers in China is putting further pressure on profit margins.
The good news is that the subsidies financed research that has made solar more efficient and less costly. In the meantime, First Solar has been working diligently to reduce its costs to survive in a world without subsidies. But it’s not yet clear whether the cuts will be sufficient to stave off losses when the government payments are gone.
-
Four Surprising Signs You’ll Never Retire (and How to Fix Them)Gearing up to retire? If any of these four signs ring true, you may want to make some changes before you do.
-
Stocks Rise After Trump-Powell Fed Tour: Stock Market TodayNvidia hit a new all-time high intraday, but another renowned semiconductor name and some less iconic stocks were bigger movers Friday.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have TodayBerkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have TodayProcter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
How Can Investors Profit From AI's Energy Use?Global energy demand is expected to grow by leaps and bounds over the next several years as AI usage accelerates. Here's how to get a piece of the pie.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
The Best Tech Stocks to BuyTech stocks are the market's engine of growth. But what defines a tech stock? How do you find the best ones to buy? We take a look here.
