About That First Solar Deal Announced This Past Week

Updates

April 2, 2013: Timing is everything. The original post had to do with a SeekingAlpha contributor was was very, very bearish with regard to First Solar. Today, a SeekingAlpha contributor was gushing all over about the merits of First Solar:

My favorite solar pick is U.S.-based First Solar, primarily because of its market leadership and strong financials, which are unmatched in the industry. 

So, how is it working out today? The market is having one of its biggest days in last few weeks (and the last few weeks have been good to those in the market). The Dow is up almost 100 points and the S & P broke another intra-day record, surging almost 11 points (CNBC talking heads get excited when the S & P rises one or two points; I can only imagine how giddy they are today.) So, on a day when the market is surging and "everything" is green, how is FSLR doing? It's down almost a point, down almost one percent. Not good any day, but particularly on a day when the market is surging, it's not a good sign when a company is falling. As my dad used to say, and I'm paraphrasing, "if you can't make money in the market on a day like this, you shouldn't be in the market."
 

Original Post

I didn't get a chance to link this article yesterday because there was just too much to do. But, like so many things, I eventually get around to it.

Remember the story about First Solar buying a solar farm in California from Goldman Sachs? Here is one person's take on the deal, from SeekingAlpha:

First Solar has had a good run since last June, gaining 130% from those lows to its current price of about $27. But that price, in turn, is well short of the February high of over $36, and it seems that the next move is down. [The run was due to renewable energy credits -- RECs.]

That's because of a deal that FSLR is spinning as a positive, its purchase of a 150 Megawatt solar project in California. The bad news is in the name of one of the sellers, Goldman Sachs. If Goldman is getting out of this business, it's very bad news for the business.

FSLR has a buyer for the energy that will result from the project, Sempra Energy of San Diego, and it gains some panel sales from the deal, as the original plan was to use another company. But this is a deal made from weakness, not strength, and investors need to hope that the weakness is short-lived.

Again, you measure solar stocks now by deal flow. You want to see projects getting built that have a power company taking the electricity and an investor taking ownership of the property and the resulting RECs. The more deal flow, the more positive you can be. Anything that reflects negatively on deal flow is a negative. I think it highly likely that FSLR will now test its previous lows, and while my long-term view for the company is survival, you can get it for less than you'd pay now.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here, or what you think you read here.  

There is an interesting tie-in to the Bakken.

At least one developer has opined that Wall Street money has not yet bought into the Bakken. When it does, it will move the Bakken to a new level. In the First Solar case, it is just the opposite: Wall Street, in this case, Goldman Sachs, is getting out of the solar business.

Having said that, we are now six years into the Bakken boom on the North Dakota side of the state line, thirteen years on the Montana side, and there does not seem to be that influx of Wall Street money; one could argue that we would have seen it by now if it was going to materialize. Perhaps all we will see is a major oil company buying one of the smaller Bakken-centric companies. One certainly gets the feeling that the Bakken boom has not captured the attention of "big money" and perhaps it won't. Maybe that's good.

Wow, I got a long way from the original story on First Solar, didn't I?