Will First Solar Get Gobbled Up? $FSLR
Recently Businessweek speculated that now would be the best time to purchase First Solar (NASDAQ: FSLR). The organization looked at First Solar’s precipitous fall in value and observed that a company like General Electric or Siemens AG would be likely suitors for the company. The company made a number of interesting moves in 2011, but at least one analyst thinks the company doesn’t have such plans at this point.
“First Solar Inc. has gotten $22 billion cheaper,” Businesswire reported in “First Solar Never So Cheap in Takeover Boon for Energy: Real M&A”. The publication said that First Solar’s stock has plummeted by 76 percent in 2011 and called it the biggest drop in the Standard & Poor’s 500 Index this year.
First Solar has made a number of moves as it works to remain competitive in an industry rife with increased competition. Among other thins, the company fired its CEO and replaced him with former CEO Chairman Mike Ahearn. And during the company’s 2012 guidance earlier in December, the company anticipated lowered earnings in 2011 and in 2012. For 2012 it now anticipates earnings in the $3.75 to $4.25 per share range.
Despite such changes, Jeffries and Co. Inc. Equity Analyst Jessie Pichel doesn’t think the company’s board is interested in being sold to another company or pursuing an ownership arrangement like of Total SA and SunPower, wherein Total owns more than 60 percent of SunPower but lets it operate independently. “I don’t think they’re smart enough to pursue a partnership,” he said. “They should be looking for a takeover and they’re not.”
The changes reflected a long-term strategy rather than a short-term one. “They’ve definitely smoothed their revenue growth and earnings with this reset. So they’re basically pushing out revenue recognition on their very possible projects and they’re pulling in lower margin projects in newer markets,” Pichel said. “They’re definitely setting themselves up for longer term growth at the expense of the near term stock reaction.…And one has to wonder if this is being done ahead of a new CEO getting shares.”
Still, the company could be subject to a hostile takeover and would have to consider any such offers as a publicly traded company, which leads back to the speculation in the Businessweek piece. “I think anyone interested in owning projects may be interested in the company those are the two most obvious names that are thrown out there,” Pichel said.
While GE is pursuing its own solar, launching construction on a new manufacturing plant in 2012, it has partnered on projects with First Solar. Siemens doesn’t really have any solar manufacturing subsidiaries.
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