Is Now the Time to Buy This Rising Star in Solar?
Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The recent news that First Solar (NASDAQ: FSLR) experienced a 52% increase in revenue had many investors wondering if this was a sign of promise for the solar-energy industry. First Solar sets itself apart from others in the field by providing solar panels at an affordable rate. Let's take a look at the market for solar.
Until First Solar came along, JA Solar (NASDAQ: JASO) seemed like it controlled the market, serving as the largest producer and seller of crystalline silicon solar cells. First Solar switched crystalline silicon for cadmium telluride to save manufacturing costs, giving consumers a cost savings not provided by other solar energy providers.
But First Solar wasn't the only issue JA Solar faced. The company dealt with a sharp decline in the solar energy industry, eventually making the switch to solar cells in order to increase profit margins. By centralizing manufacturing to its own operations and growing its Asian market share, JA Solar was able to begin making a serious dent in First Solar's share of the market.
JA Solar reported a 6% increase in revenue in its most recent quarter, with shipments exceeding guidance during that time frame. The company reported success in Japan, a market that has a higher average selling price than other areas. However, sales in China were down for the quarter due, in part, to the company's decision to focus on areas with more rewarding profit margins.
On the rise
By contrast, First Solar hit quite a few "watch" lists with its impressive 52% quarterly revenue increase. Recently, the Solar Energy Industries Association announced that solar energy now accounts for 48% of all new energy installations in the U.S. This is an all-time high for the industry, leading experts to predict that the solar photovoltaic market will hit $155 billion by 2018.
First Solar is leading the way, but the company is by far not alone. SunPower (NASDAQ: SPWR), considered one of the top solar module makers in the country, is exceeding expectations by far. The company announced a year-over-year earnings gain of 350% last year, putting it atop watch lists alongside automaker Tesla as a stock of the future.
Solar energy still has some obstacles to tackle before reaching widespread adoption. While it makes up less than 1% of worldwide energy consumption, experts believe solar energy could make up one-third of all energy use by 2060.
But for investors, solar energy still faces competition from other renewable-energy sources, like wind and biofuels, which are both serious contenders in the worldwide effort to go green. Environmentalists have expressed concern about the industrialized footprint of large-scale solar-energy installations. Consumers are also concerned about the cost of subsidies, which inevitably come from taxpayer dollars.
Still, despite these concerns, consumers stand behind the concept of preserving our planet for future generations. The rising cost of fuel, combined with diminishing supplies, make alternative energy a necessity for future generations.
The outlook for JA Solar, First Solar, and SunPower is bright, with all three companies poised to gain from upcoming shifts in the market. It should be noted that while First Solar's panels are less expensive, the energy output is also lower than its competitors, putting out only 80 watts vs. the 230 watts put out by SunPower and JA Solar.
SunPower's 350% gain in earnings make it a stock to watch, but compare the company's recent quarterly earnings report to the competition before making a final decision. SunPower reported $635 million in revenue, down 1% from a year ago. JA Solar reported $270 in total revenue and First Solar had $755 million in revenue.
First Solar is expected to have a promising 2013 as it moves into the residential rooftop market. The outlook for Thomson Reuters analysts recently predicted per-share earnings of $3.51 on revenue of $3.1 billion, with revenue expected to increase to more than $4 billion in 2015. The company's research into using silicon solar panels prompts analysts to speculate on a bright future for the company.
JA Solar recently reduced its outlook for 2013, stating that it expects revenue to fall to between $310 million and $330 million in the fourth quarter. This is below Street estimates of $381.4 million. Executives blame both economic troubles in Europe, which limits financing, and volatility in the industry.
With a marked increases in recent months, analysts are perhaps most closely eyeing SunPower. Can the company maintain a 350% increase? For its second quarter, SunPower forecasts revenue of between $540 million and $590 million, due in part to its planned expansion in overseas markets.
Solar stocks in general are hot right now, but it's hard to ignore Sunpower's exponential growth in recent months. Known as the most efficient solar-panel manufacturer, SunPower may prevail even in an industry where everyone is winning.
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Stephanie Faris has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!