When it comes to profitability and efficiency, First Solar (FSLR, Financial) is the best stock in the solar industry. Despite its track record of profitability and strong growth, shares of First Solar have pulled back recently due to a weak quarterly report. However, I think the recent pullback is a buying opportunity and investors should consider adding it to their portfolios before the stock breaks out.
CdTe technology
First Solar is one of the most powerful solar companies present in the solar industry, but the company mainly focuses on creating large utility-scale projects. Although the outcome can be uneven, the company has the ability to generate a lot of cash by creating projects in the long-term.
One significant reason the company looks attractive is its robust balance sheet. The company uses it to build projects and sell them as needed. Moreover, it is efficient in enhancing and packing more energy production into a smaller space.
First Solar is the only prominent firm to use CdTe solar technology. The use of CdTe technology proposes discrete benefits as compared to c-Si technology that permit it to generate more power per rated watt in actual conditions.
Due to higher efficiency, First Solar’s margins are comparatively better than peers like SolarCity (SCTY), which makes the bull case for the stock even stronger.
An Advantage for First Solar
Over the past few months, shares of 8point3 Energy shares surged to the point that its dividend yield is at a generous 5.5%. The surge in 8point3 Energy's shares as well the S-3 filing could lead to a huge advantage for First Solar. Not only First Solar, but SunPower as well.
If they can sell the projects they are finalizing in 2016 for a greater margin, they could generate hundreds of millions in cash in the impending half and share one more lucrative year.
Furthermore, another advantage is both companies can anticipate $23.1 million and $27.8 million in yearly dividends from 8point3, based on the prior’s quarter dividend, after the leniency period ends.
Conclusion
First Solar’s recent pullback should be seen as a buying opportunity. The company’s fundamentals and prospects are still strong and the stock should perform well going forward. Despite the volatility in the solar sector, First Solar is a safe and sound buy.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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