Insights

Behind First Solar’s Incredible Quarter

First Solar (NASDAQ: FSLR) continues to churn out solid results year after year, which is why it’s one of the best-performing solar manufacturers in the world. The company’s differentiated thin-film product continues to get better, and potential subsidy changes in the U.S. could give the company tailwinds for years to come. 

While results in the second quarter of 2022 were solid, it’s projected results as far out as 2026 that have to impress investors in the solar industry

Image source: Getty Images.

First Solar’s performance

Understanding First Solar’s second-quarter results isn’t straightforward. On the surface, a slight decline in revenue to $621.0 million and a negative 4% gross margin seems bad. But the final net income figure was $56 million, or $0.52 per share, and there were some important caveats in the results.

An impairment on the Luz del Norte project in Chile had a negative nine-percentage-point impact, and sales freight reduced gross margin by a whopping 16 percentage points. So without the one-time Chile impairment or shipping costs, gross margin would be a fairly impressive 21%.

First Solar did record a $245 million gain on selling its Japan platform business in the second quarter, but management expects to record a $0.38 to $0.52 loss per share on selling the Luz del Norte project in 2022. This kind of volatility is one reason First Solar is getting out of the development business. 

A bright future

Investors are often more worried about future projected results than reported results, and that’s where First Solar really shined. Management said the company’s 10.4 GW of bookings since the first-quarter earnings call had an average sale price of $0.301, which is strong pricing and an increase from commodity solar panels selling for around $0.20 per watt as early as 2020. Those bookings also stretch out to 2026, so any cost reductions the company can generate in the meantime will help margins.

Management has also begun including adjustments for shipping costs and pricing panels to be picked up at the factory. That will shift shipping risk, which I highlighted above, to the buyer. 

There’s no bill passed yet, but the potential climate change bill agreed to by Senate leaders last week could also have a big impact on First Solar’s future. The company could get a tax credit for building manufacturing plants in the U.S., along with tax benefits customers could get for installing U.S.-made products. 

Hitting on all cylinders

First Solar continues to operate efficiently, and it’s going to see some very impactful changes in the next few years. Most importantly, the rapid reduction in solar panel prices seems to have subsided, which will make it easier to plan for growth and generate sustainable profits. The company is also benefiting from U.S. manufacturing and technology differentiation, which are leading to multiple years’ worth of backlog. As two new production facilities are completed that could double production, First Solar has a lot of growth ahead in solar. 

Travis Hoium has positions in First Solar. The Motley Fool recommends First Solar. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info