tag:blogger.com,1999:blog-4815867514277794362.post6069467317481575819..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Why I am short First SolarJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-4815867514277794362.post-76340885844716984632010-09-10T04:52:54.554+10:002010-09-10T04:52:54.554+10:00walmart funded first solar. first solar isn't...walmart funded first solar. first solar isn't all about technology. they get it in terms of the "business model", thats they have to be the lowEST cost player in a commodity business. Thats why they not only keep lowering the price, but they give it back to customers so installed base are captive and prevent new entrants. first solar is at a point where they have scale and they are the biggest as well as cost/price leader, so the fair comparison here is probably costco or ryanair. the short case seems to be a very superficial/incorrect analysis of the "moat"Davehttps://www.blogger.com/profile/04119764920574958862noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-40047637278369634232010-07-22T01:12:21.858+10:002010-07-22T01:12:21.858+10:00Apparently, FS has someone with title of "Dir...Apparently, FS has someone with title of "Director of Disruptive Technologies" to keep an eye out for emerging solar technologies. So yes, I would say a) this is a smart management team and b) they are well aware of the threats out there. With their strong Balance Sheet I would think if they needed to they could buy some of these emerging technologies to bolster their competitive position even further.<br /><br /><br />here is a relevant quote I found from greentechmedia...<br /><br />First Solar's Rafi Garabedian, Director of Disruptive Technologies, spoke at a recent OIDA event in Santa Clara, California and reviewed the First Solar roadmap out to 2014. Here are some of the numbers:<br /><br /> * 2014 roadmap goal of 52 cents per watt at the panel level -- accomplished through efficiency gains and improvements in throughput<br /> * 14% module efficiency in 2014<br /> * Capex at 65 cents per watt factory capacity. <br /><br />Garabedian explained that First Solar sees the solar industry currently in a "transition market" where we are dependent on subsidies and compete against peak power plants. They believe that if they achieve their roadmap numbers -- we can move from the "transition market" to a "sustainable market" and compete directly with baseload power.<br /><br />Other numbers from First Solar<br /><br /> * It takes only 2.5 hours for the factory to go from glass to module<br /> * 2012 production capacity will be 2 gigawatts <br /> * Energy Payback Time (EPBT) is .65 .8 years (EPBT includes manufacturing and installation). Garabedian challenged the silicon guys to lower their silicon consumption to keep up with the First Solar EPBT.<br /> * Q1 conversion efficiency was 11.1 percent, Q1 manufacturing cost was 81 cents per watt, Q1 revenue was $568 million<br /><br />Garabedian said, "What looks disruptive to a VC might not look disruptive to us."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-49035637819005127882010-04-20T08:04:57.824+10:002010-04-20T08:04:57.824+10:00I suggest the author clarify his cost figures, reg...I suggest the author clarify his cost figures, regarding semiconductor cost/ingot. The materials involved are different, and their costs are *wildly* different. <br /><br />Silicon is a commodity material, and many sources exist. However *Tellurium*, used in fistSolar's CdTe solar cells, is one of the rarest elements on earth, and there are only a few suppliers (mostly copper refineries, selling an {increasingly precious} by product.)Larry_Phttps://www.blogger.com/profile/17543327228811365805noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-61761728675338353122010-04-15T10:53:45.772+10:002010-04-15T10:53:45.772+10:00Looks like I picked the wrong week to stop sniffin...Looks like I picked the wrong week to stop sniffing glue!<br /><br />-Steve McCroskeyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-52674091638313214542010-04-15T02:00:04.605+10:002010-04-15T02:00:04.605+10:00Leaving fondamentals aside, technically the stock ...Leaving fondamentals aside, technically the stock looks like it could break out in a hurry. I would strongly advise a stop-loss. Don't fall in love with your story, it's the stock we're talking about here.Isam Larouihttps://www.blogger.com/profile/17824104233197250291noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-3418860507217578772010-04-14T05:26:15.450+10:002010-04-14T05:26:15.450+10:00John, a couple of mistakes to point out om an othe...John, a couple of mistakes to point out om an otherwise insightfull article. The first is in talking about the labor in the FS factory, FS modules are frameless, the is no cost in a frame or in labor. Secondly the cost of an invertor is the cost of an inverter, and it doesn't care what type of panel made the DC power, large scale invertors cost are determined by rating (say 10 mW) no mater if a billion modules are feeding them. FS, just through ecomies of scale can purchase and install the BOS cheaper than the competition.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-62918854287510306242010-04-13T09:29:42.259+10:002010-04-13T09:29:42.259+10:00Hi John,
How do you determine when it is the rig...Hi John,<br /><br /><br />How do you determine when it is the right time to short?<br /><br />The analysis above presents the case of why First Solar is loosing it's cost advantage. However, that is very different from making the case that shorting First Solar now is the right investment timing. <br /><br />I think time is on the side of First Solar and it is strongly against the short sellers. <br /><br />First, we have to assume First Solar management is competent and is very aware of all the challenges identified in your analysis. As such the company will attempt to address these challenges. Since the company is financially strong, there are a wide number of options and, very importantly, the time needed to execute these options. Over time, as these options are explored, many events can stuff the short seller. Heck, FSLR probably can just buy some of it's competitors. <br /><br />My second concern is rising tide lifts all boat. Right now, the recovery in the economy is picking up steam everyday and along with it energy demand. Furthermore, green energy in particular is getting a lot of attentions. The tide is rising strongly and it will be a while before the tide goes out again.<br /><br />Unless the upside is really compelling, I normally hate the idea of having time working against me.<br /><br />At any rate, you've probably already considered these. Perhaps you can elaborate a bit more on your decision making process for the timing of shorting fslr.狂猪https://www.blogger.com/profile/16599529315620633684noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-87619909000324822572010-04-13T02:22:39.995+10:002010-04-13T02:22:39.995+10:00Simply brilliant.Simply brilliant.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-20529789574504230612010-04-13T01:47:35.388+10:002010-04-13T01:47:35.388+10:00Looks like I picked the wrong week to quit smoking...Looks like I picked the wrong week to quit smoking. <br /><br />-Steve McCroskeyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-31528695915304146262010-04-11T05:24:02.276+10:002010-04-11T05:24:02.276+10:00@ Bustem: PND business for GRMN is definitely not ...@ Bustem: PND business for GRMN is definitely not valued at 0 or negative value...assuming 9x EBITDA for other businesses it is probably valued at 5 - 6x EBITDA. Not pricey but not zero either.Minotaurhttps://www.blogger.com/profile/13358228190290277732noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-62129000409976654622010-04-10T04:00:49.861+10:002010-04-10T04:00:49.861+10:00Can anyone name a commodity-producing industry who...Can anyone name a commodity-producing industry whose constituents traded at a sustained level of enterprise value to replacement cost of capacity in excess of 1x?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-59989984434952756832010-04-10T02:08:32.883+10:002010-04-10T02:08:32.883+10:00When it comes to technology, there is a high degre...When it comes to technology, there is a high degree of uncertainty. There will always be firms that come and go, in any industry, and it's impossible to predict who will adapt and who will fail. Of course there are the Palms, but there also companies like Apple, who have adapted and ventured into new markets. In addition, the notion that in order to make money you need to "change the world" is pure fallacy--a classic misconception. If a company cannot extract a profit from the value it delivers, then it will fail. A good example is Youtube, which is currently losing about a million bucks in cash per day. Much to my dismay, nothing in life is ever free. While Youtube's storage cost for one video may be a penny or two, that adds up when you have millions of videos up all the time. <br /><br />As for shorting Garmin, everyone knows they have a maturing market--the analysis you offer is well known and baked into the current share price. In fact, it looks like the market has already valued Garmin's PND segment at zero (or perhaps even at a negative value).Unknownhttps://www.blogger.com/profile/15636399376320983098noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-27228513169963536382010-04-09T16:10:08.066+10:002010-04-09T16:10:08.066+10:00The main reason this post is incorrect is because ...The main reason this post is incorrect is because First Solar continues to find ways to improve its efficiency and decrease its module costs over time. Crystalline solar, on the other hand, has hit a wall in terms of efficiency improvements, and cost reductions are coming from only very slight further reductions in polysilicon costs, and from reductions in margins for the crystalline solar food chain.<br /><br />Your assessment is probably correct for 2H10, and part of 2011, but then when crystalline solar runs out of costs to cut, FSLR will still be able to reduce costs through efficiency improvements.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-75738083072757147512010-04-09T15:41:38.513+10:002010-04-09T15:41:38.513+10:00Long time listner, first time caller. I'm real...Long time listner, first time caller. I'm really interested in what you normally have to say, but I think that you're a little wide of the mark on a few things here John. <br /><br />Staibler-Wronski effect only pertains to hydrogenated amorphous silicon (i.e. what the AMAT lines make), not CdTe, which aside from being a completely different chemistry is crystalline. Reliability is always a concern, however you shouldn't tar all thin film PV with the same brush.<br /><br />Given the low efficiencies (which really hurt cost through balance of systems) there isn't much future in amorphous silicon. First solar continue to lower costs, while the drop in the Si price has allowed the c-Si suppliers to drop prices too, either way a-Si is going nowhere, probably why AMAT is getting out of the game.<br /><br />FSLR can at least try to keep the competition out of CdTe with their patent portfolio, one of the advantages of being in the game so long, and also being the big guy. What they can't keep out is a completely different technology, CIGS.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-32345206760130013372010-04-08T18:15:35.419+10:002010-04-08T18:15:35.419+10:00CrocodileChuck: good to see that you follow Gregor...CrocodileChuck: good to see that you follow Gregor and the videos he posts. Unfortunately you don't even cite Bill Gross properly (no attribution, incorrect facts & numbers).<br /><br />http://gregor.us/solar/thoughtful-solar-guy/IFnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-43451011513706183272010-04-08T14:52:27.146+10:002010-04-08T14:52:27.146+10:00Your call on First Solar is directionally correct....Your call on First Solar is directionally correct. But this has nothing to do with the spot price of silicon ingot. This kind of PV technology will never pan out per the promises of its proponents. Why?<br /><br />Thermodynamics.<br /><br />Sunlight is everywhere and 'always on' within 30 degrees of the equator. BUT: 1) the power of ambient sunlight is of the order of one watt per sq m. By way of a household example, the power of a portable hair dryer is one watt per SQUARE CENTIMETER. So the problem isn't the conversion rate of the PV panel or expanse of film per se-its the diffuse nature of sunlight itself. 2) The second problem with PV: once you build the hardware, THEN it must be installed, on roofs or wherever, and wired up to the house or bldg, then to the grid. This is significant, and will mean that this technology is only 'economic' with subsidies from government.<br /><br />ps there are other solar technologies however, that are economic.....CrocodileChuckhttps://www.blogger.com/profile/10762442097044797842noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-90051804496275168642010-04-08T05:44:43.562+10:002010-04-08T05:44:43.562+10:00Well, congratulations to your research. But aren&#...Well, congratulations to your research. But aren't you a little late to the shorting show on this one?<br /><br />Others started shorting FSLR beginning of 2008 as soon as it became obvious that both Germany was going to cut back its subsidies for solar energy and at the same time chinese competition was around the corner.<br /><br />Both margins and revenues will very probably be deteriorating further imho but i do not have the guts to put on another short right now.g.schwarznoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-52506889587840691932010-04-08T05:35:26.294+10:002010-04-08T05:35:26.294+10:00Here are couple of advantages of Cd-Te over Poly-S...Here are couple of advantages of Cd-Te over Poly-Si:<br />1. Can generate electricity even under dim/overcast conditions - this can extend electricity generation time by about 2 hours.<br />2. For the stated efficiency in Poly-Si panels, they have to be perpendicular to sun. Ever wondered why SPWRA claims their "tracking technology" makes them superior? This adds additional costs to the panels. Cd-Te can be placed horizontal to the ground. No panel movement needed.<br /><br />You mention about AMAT's A-Si - the major public company using that technology, ENER's factories are running at 30-40%. IMHO, A-Si is done. With $1.60/watt cost, doubt it will see sunshine.<br /><br />Ever considered capex/watt in to your equation? X-Si is 50-70% more than Cd-Te.<br /><br />Ever considered project financing costs in to your competitive advantage equation?<br /><br />Ever considered which supplier has complete capability to deliver a solar plant? Unfortunately, in future no one really cares cost/watt. The question would be what would be cost/KWhr under PPA agreemetns.<br /><br />Ever considered which company owns land which can be easily connected to grid in to equation? Why do you think OptiSolar won such massive deals with PG&E but had <50MW capacity when acquired?<br /><br />Ever considered the fact solar wafer processing costs run around 70-90c/watt in to equation - what this means is that even IF Poly prices goes to $0, these companies will have 70-90c/watt costs?<br /><br />Well, being short FSLR isnt a discovery you are making here, with 40% short interest - there are 2 specific reasons stock is underperforming peer group:<br />1. They dont have capacity in 2010. Blame Mike Ahearn for being so conservative. But 2011+ this argument does not apply.<br />2. Poly Prices have come down to $50/kg. Hey, they got only $50/kg down to go to 0 and FSLR has to cut cost by just 10-13c/watt to clear off this 'ooooh poly prices are falling through the floor' concern.<br /><br />HAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-14703216916437879442010-04-08T03:34:41.765+10:002010-04-08T03:34:41.765+10:00Looks like I picked the wrong week to quite drinki...Looks like I picked the wrong week to quite drinking.<br /><br />-Steve Mc CroskeyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-34155854647444311872010-04-08T03:24:06.389+10:002010-04-08T03:24:06.389+10:00John, can you post any evidence that FSLR financia...John, can you post any evidence that FSLR financials are deteriorating ie. bloated inventories? Otherwise it's a great story but maybe not a great short.<br /><br />Sorry if you see multiple posts. Google kept saying "error" each time I submitted.Unknownhttps://www.blogger.com/profile/14359698556065935140noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-20883150535954538522010-04-08T02:53:15.190+10:002010-04-08T02:53:15.190+10:00"if First Solar can reinvent the process once..."if First Solar can reinvent the process once, who says they can't do it again."<br /><br />I suppose you are talking about management's strong capital allocation ability.<br /><br />I drove by their HQ in Phoenix last month. It looks like something out of a SiFi movie. I actually thought it was a NASA space shuttle launch site. Not sure who's HQ is fancier FLSR or TASR.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-57232124829776825442010-04-07T23:45:23.118+10:002010-04-07T23:45:23.118+10:00You'll never produce a 1, 2 or 10 bagger, sho...You'll never produce a 1, 2 or 10 bagger, shorting companies like FSLR.<br /><br /> You are about yo be wrong in the shorts. Again.<br /><br />anon,<br /><br />R. DobbsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-48509381803304575862010-04-07T22:55:34.361+10:002010-04-07T22:55:34.361+10:00John, great post. Do you have any evidence of fin...John, great post. Do you have any evidence of financial deterioration such as exploding inventories? I love a good story but it's not enough to short. Too many things can happen before it plays out.Unknownhttps://www.blogger.com/profile/14359698556065935140noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-67207520363791451312010-04-07T21:00:17.288+10:002010-04-07T21:00:17.288+10:00surely First Solar with its market positioning and...surely First Solar with its market positioning and its solid balance sheet would be in an excellent position to find the next best solution for general solar technology<br /><br />if First Solar can reinvent the process once, who says they can't do it again<br /><br />don't be too quick to short a market leader!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-91999032852838442552010-04-07T18:44:04.401+10:002010-04-07T18:44:04.401+10:00Not sure why you say that this short is 'socia...Not sure why you say that this short is 'socially useless'. The idealised job of an investment manager is to allocate capital to companies that can use it, but equally to take it away from companies that are likely to destroy it.<br /><br />If your analysis of First Solar is correct, then it will no longer be fulfilling a 'socially useful' function, and should have capital taken from it and allocated to companies that can produce something beneficial, socially or otherwise.taxlossnoreply@blogger.com