JPMorgan Said Avoid First Solar: Oops! It’s Up 75%!

Picking stocks is hard.

first_solarJP Morgan (JPM) started out 2013 by naming First Solar (FSLR), the Tempe, Ariz.-based solar panel maker, as a stock investors needed to categorically avoid in 2013. 2012’s list had four names, but First Solar was apparently deemed so risky as to occupy that space by itself.

The reason, according to JPM analyst Chris Blansett, was that global oversupply issues, combined with subdued natural gas prices, would make First Solar’s products less valuable. Blansett gave the stock an “underweight” and gave it a price target of $14 — at the time, the stock was trading at $34.

Those two factors basically held true. But it wasn’t the whole story — because year to date, First Solar shares have climbed 80% and now stand at just over $55 per share.

Here are three factors that helped the company thrive in 2013.

  • In April, First Solar bought Japanese solar panel maker TetraSun, which specializes in a different, and ostensibly cheaper, solar panel design. It also gave First Solar much greater exposure in Japan, which is now the second-largest market for solar installations thanks to its nuclear industry getting mothballed. The company also revised its guidance to show installations could grow close to 70% through 2015.
  • The company has been able to build and maintain its project backlog, according to a Nov.1 RBC Capital Markets note. Two of three quarters so far saw monster year-over-year revenue increases, though there was a major decline in Q2. Still, revenue is expected to be up 4% YOY in 2013.
  •’s Travis Hoium believes companies like First Solar and Solar City (SCTY), which is up more than 300% this year (though is a developer and not a manufacturer), have through dint of luck and savvy survived in an industry that’s seen a massive amount of consolidation. They’ve also had to function without the intensive state-level support enjoyed by Chinese counterparts.
First Solar announces Q4 earnings in February.

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