Solar: Companies & Analysts See Bullish 2011

Written By Nick Hodge

Posted December 17, 2010

You can’t argue against the fact that First Solar (NASDAQ: FSLR) is a juggernaut.

And not just a cleantech juggernaut, but a broad-market-crushing juggernaut.

In the four years since its initial public offering (IPO), it’s simply trounced the Dow, and stalwarts Exxon (NYSE: XOM), Siemens (NYSE: SI), Johnson & Johnson (NYSE: JNJ), and plenty of others.

First Solar (NASDAQ: FSLR) 5-Year

First Solar’s thin film solar technology and cost advantages have made it the most dominant cleantech company in the world, passing even the German and Scandinavian giants of the early 2000s.

Its status as such makes it a leading indicator for the entire industry, and can illustrate what stocks you should be buying.

Like Paul the Octopus

Sadly, Paul the premonating octopus has left us.

But just as he correctly predicted World Cup outcomes, First Solar’s health can predict the outcome of future solar stock performance.

And this week, the company said it expects revenue and earnings to be above analysts’ expectations in 2011.

It raised 2011 earnings per share (EPS) guidance to between $8.75 and $9.50, above the $8.61 analyst consensus. It also said sales would be $3.7-$3.9 billion, 46% higher than expected 2010 sales.

Analysts immediately sounded the bullhorn.

PacificCrest told clients, “First Solar should be able to sell everything it can produce and essentially set its own prices.”

Jefferies & Co. said the company’s sale of a 290 MW project to NRG Energy (NYSE: NRG) “should quell any investor concerns about selling large-scale projects.”

The stock currently trades for $130 per share.

Kaufman Bros. raised their price target to $165. UBS reiterated its Buy status and upped the price target to $160.

That’s a 23% premium on what’s essentially become a blue chip stock.

Folks, 23% is more than twice the Dow’s performance in 2010.

A premium that high on a stock this big is an incredibly bullish signal — not just for FSLR, but for solar in general.

Peer pressure

Other solar companies are just as bullish.

Trina Solar (NYSE: TSL) — the world’s no. 2 panel maker — said this week it plans to increase its global market share to 10% next year. CFO Terry Wang thinks U.S. shipments will double next year, and expects “gross profit to grow tremendously and net profit to grow even faster in 2011.”

That stock currently trades for $22 per share. But Auriga just reiterated its Buy rating and $38 price target, indicating 73% potential upside.

Renesola (NYSE: SOL) is trading for eight bucks. Piper Jaffray just raised its target to $20 — a 150% premium.

ThinkEquity just upgraded LDK Solar (NYSE: LDK) to Buy with a $15 price target. It currently trades for $10.

But why?

I thought you’d never ask…

International solar market research and consulting firm Solarbuzz is out with its quarterly report.

In Q3 2010, global solar demand was 4 GW, up 107% from a year ago. Total industry revenues were $17.9 billion, up 74%.

The report also notes that 2010 will be a record year for the industry, forecasting total installations of 16.3 GW. That’d be a 117% increase over installations in 2009.

It expects 20.4 GW to be installed in 2011, setting the stage for another significant annual jump.

The growth fire was fanned by price reductions in 2009 that led to much higher demand this year. And the reduction of tariff programs in Europe will cause prices to fall further next year.

Solar is quickly developing economies of scale and reaching parity in more and more places.

What’s more, the tax bill passed by the Senate this week extends key tax incentives for another year.

The 30% federal tax credit for building a new cleantech facility was set to expire at the end of the year. Anytime a tax break is renewed, it gives the industry and banks clear guidance — which allows them to start more projects.

But more importantly, it gives investors confidence. They know more projects means more revenue.

It’s why First Solar raised sales guidance for next year. It’s why Trina Solar said it expects to double U.S. shipments next year.

And it’s why you need to immediately watch our new solar investment webinar, showing you how to easily pocket the solar market’s coming gains for yourself.

Call it like you see it,

Nick Hodge

Editor, Energy and Capital

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