YGE

Solar Not So Hot

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Image Source: zak zak Though First Solar stands alone as one of the stronger players in the solar space, we think the industry backdrop is among the weakest in our coverage universe. We’re huge fans of clean renewable energy but separating what we want to be a good industry like solar from an industry that actually has strong structural characteristics is a key component of being a good investor. Oftentimes, it is better to own an average company in a great industry than a good company in one of the worst industries out there. By Brian Nelson, CFA Sometimes it is too easy to invest with your heart and overlook opportunities across “sin” stocks. For example, you may dislike tobacco, … Read more

SEC Proposes Barring the Chinese Units of the Big 4 Accounting Firms for 6 Months; A Washington-Beijing Scuffle; Neither Firm-Specific, Nor Is It “New” News

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On Thursday, Reuters reported that SEC Administrative Law Judge Cameron Elliot believes “Chinese units of the global ‘Big Four’ accounting firms (KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst and Young) should be suspended from auditing U.S.-listed companies for six months in an escalation in a long-running dispute over regulators’ access to documents.” Though the accounting firms have indicated that they intend to appeal against the ruling, the article did unnerve investors in many US-listed Chinese stocks, including Baidu (BIDU), which notes Ernst & Young Hua Ming LLP as its principal external auditor. This is not “new” news. Baidu goes to great lengths to highlight this scenario as a risk in its 20-F on page 32, with potential de-listing (not bankruptcy or … Read more

Why We Didn’t Get Excited About First Solar

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Tuesday afternoon, solar panel maker First Solar (click ticker for report: ) announced disappointing second-quarter results, confirming some of the issues we have long held with its business. Valuentum subscribers know that we don’t like the firm’s long-term prospects considering the industry’s ultra-competitiveness and First Solar’s forecast of weak gross margins. During the quarter, revenue at First Solar declined 46% year-over-year, to $520 million, more than $200 million short of consensus estimates. Earnings per share were 71% lower than a year ago, coming in at $0.37, again well below consensus expectations. Free cash flow was also materially weaker, registering $168 million (down 49% year-over-year) and equal to 32% of revenue. Image Source: FSLR 2Q 2013 Earnings Slides The situation for … Read more

First Solar Is Wise to Raise Capital

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First Solar’s Wild Ride Without question, solar modules and systems maker First Solar (click ticker for report: ) has been among the most controversial stocks in our coverage list during the past few years. The stock recently popped back above the $50 level on positive earnings guidance for 2014 and 2015, after nearly falling into the single digits last summer.  Though we’ve recently increased our fair value estimate for the solar maker to $47 per share (at the time of this writing) as we’ve warmed up to its mid-decade outlook (which looked better than what we had previously anticipated), management made a wise (and opportunistic) decision to raise equity capital at current levels via the announcement of a secondary offering yesterday. … Read more