I Was Wrong About the Quarter for First Solar (FSLR)

Current Price: 292.50


FSLR managed costs and margins very well and beat expectations by a mile. However, I just don't see a tremendous interest in buying.

If the stock stays below $300, the short side still may have a chance: valuation is still getting rich and oil may keep falling.

AGCO (AG) Upgraded at UBS

The stock is really taking off towards the close.

Currently, up 5.72% to 62.23.


AGCO numbers raised at UBS to $3.65 from $3.15. Price target raised to $54 from $50. Maintains Sell rating.

Lets expand on that. They raised their numbers by 0.50 or 16% but raised their price target 8%.

The stock grew sales 40% and is estimating to keep growing sales at a long term growth rate up to 30%. Margins are expanding: EPS grew 100% in the MRQ.

But the model for the UBS analyst says the stock will trade a at 15 P/E?

Your model is broken!

Regardless, I recommend taking profits due to the very large run-up the stock has had since most recent recommendation.

First Solar (FSLR) Reports After Hours:

From Clusterstock (sums up things very well):

Key Metrics:

• Q2 EPS: $0.58 consensus, $0.70 whisper
  
• Q2 Revenue: $216.9 million consensus
• Gross Margin: 49% consensus
• 2008 Guidance/Consensus:
  • $975 million to $1.05 billion in revenues ($1.04 billion consensus)
    
  • 420MW to 460MW of shipments
  • $36 million to $39 million in plant start-up costs
  • $50 million to $52 million stock-based compensation
  • GAAP operating margin of 25% to 30% with a 28% to 30% tax rate
  • 83 million to 84 million fully diluted shares outstanding
  • $500 million in capex
  • EPS: $2.95 consensus
    

• 2009 Consensus
  
  • EPS: $5.84 consensus
    
  • Revenue: $1.88 billion consensus
    

We're looking for color on:

• speed, progress and outlook for the Malaysian plant ramp up
• how much margin pressure there will be in the near-term due to the high costs of ramping up in Malaysia
• strength of the US utility (and possibly residential) market demand with or without ITCs (Investment Tax Credits)
• likelihood of further subsidies around the world and FLSR strategy for taking advantage of them
• efficiency improvements
• possibility of a weaker Euro (the currency FSLR receives a vast majority of their revenue in)
• how they will respond to the increased competition as countless technology companies, from General Electric (GE) to Intel (INTC), take the plunge into solar

And, of course, any reassurances regarding the possible toxicity of their cadmium telluride (CdTe) cells, their supply of Tellurium (a rare element necessary for the production of their CdTe cells), and FSLR's insider stock sales.

http://www.clusterstock.com/2008/7/first-solar-fslr-q2-preview-market-expecting-a-blowout

The last paragraph needs emphasis. From early April, insiders have sold 577,907 shares for an average price of $276.28 for a total of $17,410,277. More importantly, ever since April, FSLR has been in the wide range the stock currently is in. Market is saying telling us something.

http://moneycentral.msn.com/investor/invsub/insider/trans.asp?view=All&Symbol=fslr


I also don't understand why everyone harps on FSLR's ability to create solar panels more cheaply (about half) than its competitors when it's can only convert half (or less) of the sunlight into electricity. To me, this sounds like you get what you pay for. FSLR doesn't sound relatively cheaper at all.

Industry Conversion Efficiencies

Manufacturer	Conversion Efficiency
SunPower(Polysilicon)	23.4%
Suntech Power Holdings(Polysilicon)	18%
Sharp (Polysilicon)	13%
Kyocera (Polysilicon)	18.5%
Solarfun (Polysilicon)	17.2%
JA Solar Holdings (Monosilicon)	17.7%
Trina Solar(Mono & Polysilicon)	16.6%
Evergreen Solar (String Ribbon)	15%
EMCORE (GaAs Concentrated Solar System)	37%
Energy Conversion Devices (Amorphous Silicon Thin Film)	8.5%
First Solar (CdTe Thin Film)	10.5%
DayStar Technologies(CIGS Thin Film)	14%
Ascent Solar (CIGS Flexible Thin Film)	9.5%

http://www.wikinvest.com/stock/First_Solar_(FSLR)


Lastly, FSLR carries a HUGE risk exposure to cadmium telluride. The more I read up about this substance the more idiotic the manufacturing process sounds. Why would anyone pick an "alternative" form of energy that is scarcer than. To add, the substance may be banned as illegal in Europe due to its extreme toxicity.


I am doing to stick my head out and stick with my short call. I sell $30 up and $80 down.

Current Price: $283.64

Stories of the Day for 7/30/2008

Chicago Bridge & Iron (CBI) continues to move up strongly on the release of the Q. Investors are learning that the UK project seems to be a one-off as the rest of the backlog is performing well. The company now trades at 1/2 of backlog.

Current Price: $35.50 Up 4.85% for today. Up almost $5 from my recommendation 2 weeks ago, or 15.6%. AUG 30 Calls moved up from $2.80 to $5.80, or +107%

Garmin (GRMN) disappoints. Delays the release of their phone and weak outlook.

Current price: $39.50 Down 12.23%. LOD was $37.69. I want to take a majority of my stake out at $36.00

SPX Corp (SPW) crushes earnings.

SPX Corp. reports a rise in secomd-quarter net income to $94.8 million, or $1.74 per diluted share. In the same period last year, the Charlotte-based company earned $63.9 million, or $1.12 per diluted share.

Revenue in the latest quarter nearly doubled to $546.5 million from $278.1 million a year ago. The increase was due primarily to the fourth-quarter acquisition of APV, which contributed $217.1 million to revenue for the quarter

SPX Corp is raising its 2008 earnings guidance to between $6.40 and $6.60 per share from its previous estimate of $6.20 to $6.40. The company earned $5.22 per diluted share in 2007.

http://charlotte.bizjournals.com/charlotte/stories/2008/07/28/daily25.html?ana=yfcpc

I am extremely disappointed on this news- it's causing the stock to surge almost 10%. I have been hoping for a strong pullback in the stock before I recommend it. This is a great company and will participate in the future electrical infrastructure boom.

Owens-Illinois (OI) reports after the close. I expect to hear good news. However, I am trying to consistently lower my risk. Let's sell a 1/3 to a 1/2 of the position (depending on your risk tolerance) going into earnings.

Current Price: $48.50

*UPDATE* Currently the DJIA is up 110 points but it feels weak. I think that we will continue to see a sell-off today so don't be afraid to take some day-trading profits on your longs.

Stories of the Day for 7/29/08

U.S. Steel (X) plowed through the analyst estimates.

U.S. Steel's net income more than doubled to $668 million, or $5.65 per share, for the three months ended June 30, compared with $302 million, or $2.54 per share, during the same period last year.

Revenue climbed 60 percent to $6.74 billion from $4.23 billion in the second quarter of 2007, the company said.

The results easily beat Wall Street estimates. Analysts, on average, predicted earnings of $3.91 per share, according to a survey by Thomson Financial.

http://biz.yahoo.com/ap/080729/earns_united_states_steel.html?.v=3

Current Prices for the Steel names

X: $167.25 Up 15% and going higher. UPDATE: Now $169.20

CLF: $106.48 up 5.18%

AKS: $56.93 up 13.20%. UPDATE: Now $58.30

The relatively weak move in CLF makes me think that the Street really doesn't like the earlier announce acquisition. Lighten up on your position further.

Oil and Natural Gas continue to be weak. Oil approaches $120 and NG broke below $9. Oil & Gas Ultra Short (DUG) moves up to $37.75, or up 4.10% Let's take some more profits.

AGCO (AG) also crushes earnings.

Duluth, Ga.-based AGCO (NYSE: AG) recorded $2.4 billion in sales, a quarterly record for the company. The company earned $133.1 million in net income for the quarter ended June 30, or $1.34 a diluted share. During the same period last year, the company earned $63.8 million, or 67 cents a diluted share.

Richenhagen added the company’s “second quarter operating margins increased 1.4 percentage points to 7.9% compared to the second quarter of 2007.”

Current Price: 58.43, up 11.80%. Stock also hit a HOD of $61.67

Lets takes just some profits when it nears closer to $60 again and let the rest run. My margin expansion thesis is still intact so I continue to be bullish on AG.

Lighten Your Exposure to the Steel Names

I was a little over-enthusiastic on my original call on steel names.

There are widespread fears of a global slowdown that now isn't completely unfounded.

Current Prices

CLF: $103.20

X: $148.00

AKS: $50.20

Lets Take Some Profits in CSX and OI

Current Price of CSX: $64.40

UNP reports a good number today but we made some money, this is a tough market, so lets not give it back.

Current Price of OI: $46.25



Owens-Illinois is great. One of my favorite stocks. To boot, NG is coming down, which has been a driving factor for fall in the stocks. But, once again, fears are coming back strong and I'm not a fan of giving back profit.