First Solar Inc: The Future of Energy

AMDP Memorandum

 

To:                  Clark Hanson, Anima Mundi Development Partners

From:              Michael Davidson

Date:               7 March 2022

Subject:           Investment in First Solar Inc.

 

As our energy society expands and grows with new technology and scientific advancements, the need for renewable energy sources will skyrocket. Because our current energy usage as a society stems mainly from non-renewable energy sources, its backwards thinking to not be investing heavily in solar and other renewable energy sources. I’ve highlighted one such company that I see phenomenal potential in given the current state of the deteriorating energy market— First Solar Inc.

 

AMDP Mission Overview

 

Before examining First Solar Incorporated, I will first provide an overview of AMDP’s mission and investment guidelines and terminology—

 

·      Triple Bottom Line

o   An accounting methodology that leads businesses to examine their success not only on profit but on total economic and social impact

o   An additional focus is placed on climate impact

o   This concept is rooted in the concept of overall impact beyond financial

·      Corporate Social Responsibility (CSR)

o   A business concept that defines the responsibility of business to have a positive social impact beyond just financial in order to emphasize societal improvements

o   The idea that businesses have a responsibility to examine how their actions impact their communities

·      Social Enterprise

o   A business that highlights communal or societal improvements in their mission or vision statement, focusing an equal amount on “profits” and “people”

·      Carbon Footprint

o   The overall impact a being has on the environment

o   Whether it’s a business or a person Carbon Footprint tracks total net impact an operation has on the climate and broader climate change

 

First Solar Inc. Overview

 

Formed in 1999, First Solar Inc. is a renewable solar energy company dedicated to building, maintaining, and providing accessible solar technology and energy. The company’s beginnings lie with inventor Harold McMaster who founded Solar Cells Inc. They were then acquired by True North Partners and became First Solar Inc. 

 

The company itself was founded upon the principals of fundamentally changing the energy industry and upon the belief that “fossil fuels must yield to sources of energy that are cleaner, more plentiful, and less politically volatile.” (Welles, 1998) Being a renewable energy company, First Solar Inc. provides direct insight into their CSR practices as well as their overall social impact. This sort of CSR presence and dedication towards reduced carbon footprint demonstrates strong emphasis of AMDPs ideals and investment guidelines.

 

First Solar Inc, on their website states, “Since the beginning, we have placed sustainability at the heart of everything we do, focused not on meeting industry standards, but exceeding them and setting new ones,” highlighting their efforts and focus on CSR and triple bottom line. (Widmar, 2022)

 

 

First Solar Inc. Financial Growth

 

Currently First Solar Inc. stock trades at around $75 a share, down from $123 in November despite showing a 20.54% increase in EBITDA during 2021. From my experience, this decrease in value does not match the company’s current growth opportunities as the dip is only due to a revenue projection miss. Most of these misses are due to problems in supply-chain given the current COVID-19 situation. As the industry rebounds, the solar energy sector will rebound given the current energy need, emphasized by the current Russo-Ukrainian war.

 

This decrease in value provides an exciting opportunity to invest in First Solar at a super-discounted price. A company like First Solar has an exciting focus on R&D that might disrupt short term investors returns but maximizes the long-term holdings as renewable energy will within a 10-15 year period sky-rocket in usage as technology becomes more accessible and develops a broader scope into various energy markets.

 

First Solar Inc. in the Media

 

Given the current economic market, various industry experts have weighed in on the First Solar Inc. situation and outlook. Nicolas Chahine of InvestorPlace said, “Specifically, FSLR stock spiked 6% while the indices struggled. Ultimately, I think the bullish thesis is alive, but investors should proceed with a bit of caution.” (Chahine, 2022) Chahine here emphasizes the strong upside potential in the First Solar stock.

 

While on the other hand, Pippa Stevens of CNBC sees the recent failures of First Solar as more of a problem as their 2021 revenue fell almost $260 million short of Wall-Street’s projections. Stevens states, “Prices for contracted volumes have risen between 200% and 300% above pre-pandemic levels, First Solar said. In 2022, the company expects contracted freight rates to jump 100% year over year,” citing supply chain issues for the recent revenue miss and potential investment criticism. (Stevens, 2022)

 

While Stevens article does contradict my overall view of First Solar, it doesn’t warrant throwing investment out the window given the current state of the energy market, which Stevens overlooks in her criticism of the company. While supply-chain issues could negatively impact the company in 2022, my investment outlook isn’t a 2–4-year window but rather a 10+ year long-term investment position. This outlook emphasizes the long-term profitability of the solar energy market and the extensive R&D efforts of First Solar which will bring better returns in long-term investment window. 

 

First Solar Inc. Investment

 

After examining First Solar Inc, from both a financial overview as well as a CSR point of view, I suggest acquiring a long-term position. Currently, First Solar is trading at a discount given that traders are fearsome of increased supply chain issues in 2022. This won’t effect our position as our long-term outlook will isolate and remove any risk associated with short term supply issues.

 

Given the nature of the energy market and the political volatility of the fossil fuel industry highlighted by recent conflicts, AMDP should expect to see large investment returns within the solar market industry beginning with First Solar Inc.

 

Additionally, First Solar Inc. operates parallel to AMDP’s values and mission with their focus on CSR as well as their dedication to removing not only their own carbon footprint but also the footprint of their customers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Citations

Welles, Edward O. “Going for Broke, Strategic Partnerships Article.” Inc.com, Inc., 1 June 1998, https://www.inc.com/magazine/19980601/944.html.

Chahine, Nicolas. “First Solar Stock Is Shining Bright While Indices Struggle.” Nasdaq, InvestorPlace, 9 Mar. 2022, https://www.nasdaq.com/articles/first-solar-stock-is-shining-bright-while-indices-struggle.

Stevens, Pippa. “First Solar Shares Sink after Revenue Miss, Disappointing Guidance.” CNBC, CNBC, 1 Mar. 2022, https://www.cnbc.com/2022/03/01/first-solar-fslr-earnings-q1-202.html.

Widmer, Mark. “Responsible Solar.” First Solar, First Solar, 11 Mar. 2022, https://www.firstsolar.com/About-Us/Responsible-Solar.