06-29-2017, 07:56 AM
First Solar, Inc. (NASDAQ:FSLR) has suffered a steady price decline since announcing its decision to skip production of the Series 5 module in November 2016 due to the rapid price declines in competitor PV modules. The Series 5 was not going to be price competitive by the time it could be produced in commercial quantities, so FSLR opted to advance the development and commercialization of the Series 6.
Stocks trade on catalysts, disclosures or developments that drive stock prices up or down. FSLR is facing an 18-month long transition period (see page 5 of the Q4 Earnings Presentation, see above), an eternity in a commoditized industry where prices can decline more than 20% in a quarter. There is likely only one positive catalyst that could sustain a stock price recovery from these levels: a significant advancement in the production start date of the Series 6 in Malaysia. Without this catalyst, the stock is likely to languish for the next 12 months or until uncertainty surrounding the competitiveness of the Series 6 abates.
Most significantly, our Series 6 module will utilize essentially the same underlying solar cell technology as our Series 4 product. Given this, we believe the core technology risks involved in the transition is low. The analogy we have used in the past is that this is similar to what and how the flat panel display industry scale from one generation to the next. We are not reinventing the core technology behind Series 6, but rather increasing the module form factor.
First Solar (FSLR) Q4 2016 Results - Earnings Call Transcript | Seeking Alpha
In a similar matter, but external to the company, we are leveraging the expertise of the long-trusted equipment supplier for our core product technology tools. In some cases, we have been working with these suppliers for nearly a decade and their capabilities are well established and proven. While there clearly are risks associated with scaling to a larger form factor, we see these risks as manufacture-related in nature and not technology centered. While manufacturing risks such as throughput and yield could possibly impact the Series 6 launch, our experience indicates that overcoming these types of challenges can be addressed with a proper focus and resources. From a performance standpoint, we are focused both on reaching our target of greater than 18% efficiency as well as continuing our existing standard of excellence and reliability that our customers have come to expect. While our target efficiency represents a greater than 100-basis-point improvement from our current fleet performance, the path to achieve this performance is largely based on proven and well-understood methods that we will now be able to deploy on our new Series 6 equipment addressing certain limitations in our existing toolset.
First Solar (FSLR) Q4 2016 Results - Earnings Call Transcript | Seeking Alpha