… But I’ve decided to hold a FSLR short into earnings. My take on earnings is the following:
– FSLR will likely beat on revs and earns as they squeeze efficiency out of manufacturing
– I believe the earns and especially the guidance won’t be enough to keep traders and analysts happy, however. This is based on the following:
Concensus ’08 expectations for revenue exceed company guidance by $20M or more, so the company has to raise rev guidance just to meet expectations. They already raised guidance last quarter. They have already sold out production, so I believe inability to raise revs significantly through new sales, combined with the increasing difficulty of squeezing efficiencies out as their operations mature, makes it difficult to increase revs until significant new orders show up.
According to my oversupply thesis, I expected the “bulge” of Spain module orders to be showing up last q or this q, so, assuming I should eat my own dogfood, this means I should expect the company to be at least reasonably cautious on going-forward orders on tomorrow’s call. As you recall, during Spain’s transition to new tariff regime, new systems in 2008 need to be installed and in-service by this summer in order to qualify for the old subsidies.
I’ve heard no new news on subsidy increases (or even progress) in any of the markets: Spain, Germany, US, Italy. Thus I don’t see incremental positive news on that front.
Wild cards include yield and material costs (tellurium, esp). Don’t have handicaps on those.
I think given the risk of oversupply in 09 based on 08 capacity increases, the company will need to strike a cautious note on margins, and maintain the same tone of “We are well positioned for an oversupply phase” as everyone else is saying.
Finally, a couple analysts have come out cautious on tomorrow. Broadpoint, in particular, recommended going to the sidelines due to high expectations.
So, there you have it. Tomorrow I’ll see how good my dogfood is… Last quarter, of course, FSLR was up $50 before the open… I’ve no other solar positions at the moment.
Finally, please note that REC posted great earnings on large increases in polysilicon sales. I believe this absolutely supports my contention that increased supplies of poly will be consumed on the spot in order to create more cells/modules regardless of demand. This situation will go on until the industry begins to feel pain due to falling ASPs, which has not yet occurred to any meaningful degree.