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First Solar published its Q3 2017 results on Thursday, beating market expectations, driven by the sale of both its California Flats and Cuyama projects as well as strong standalone panel demand. That said, the most notable aspect of the company’s earnings release was its record quarterly net bookings of 4.5 GW. This is impressive, considering that it brings the company’s its net year-to-date net bookings to 6.7 GW and its total remaining expected module shipments to approximately 7.4 GW. In this note, we take a look at some of the factors that drove First Solar’s record bookings over the quarter.
Strong Global Demand
Global demand for solar products has been strong, driven by lower costs which are making solar competitive with more traditional sources of electricity, even on an unsubsidized basis, with no effective fuel price risks. Global demand for solar panels is projected to come in at over 79 GW in 2017. China has also been a big driver of solar demand, with installations in the country over 2017 projected to stand at as much as 40 GW to 45 GW. Demand for tier-1 and high-efficiency solar products, such as First Solar’s, has also been growing in the country.
Interest In The Company’s Series 6 Panels
Separately, First Solar is seeing strong customer interest in its new Series 6 panels. The panels are viewed as one of First Solar’s most important product launches in years, as they allow it to compete more directly with silicon-based panels in terms of both conversion efficiency as well as total rated power, while bringing down costs considerably (as much as 40% below the company’s current generation Series 4 modules). The company expects Series 6 production to commence at its Ohio unit in Q2 2018, with total capacity ramping up to over 3 GW by 2019. (related: How Is First Solar’s Series 6 Transition Progressing?)
Developers Hedging Panel Costs Amid Section 201 Case
The Section 201 case that seeks to impose trade barriers in the solar industry is also a factor that is likely helping First Solar notch new orders. The odds of penalties on panel imports being imposed are mounting, with the U.S. International Trade Commission issuing a preliminary ruling last month stating that cheap, imported solar panels have been hurting American manufacturers, effectively allowing the Trump Administration to make a final call on the case. This has caused project developers in the United States to accelerate module procurement timing to hedge their module costs. First Solar is likely to be a big beneficiary of this, as its panels use cadmium-telluride technology, which is not a target of the trade case (related: How First Solar And SunPower Could Be Impacted By The U.S. ITC Ruling).
Our $49 price estimate for First Solar is nearly 15% below the current market price.