Investors that have been following the alternative energy industry have likely noticed that it has been one of the strongest performing sectors this year. What’s even more interesting is that many alternative energy stocks are rallying even though the pandemic has resulted in business disruptions. For example, wind turbine and solar panel installations declined for many of the top clean energy companies yet many of their stocks have continued to rally.
When you think about things from a high level, the alternative energy sector has a lot going for it at this time. Governments around the world are creating programs that encourage clean energy usage more than ever. The technology that powers alternative energy sources is becoming more affordable and more efficient. You also have the prospect of a Joe Biden presidency that could be a huge positive for companies that offer alternative energy sources. While these stocks can be volatile investments, the upside might be worth the risk.
For example, First Solar (NASDAQ:FSLR) stock looks like a solid buy after its latest earnings release and has shown serious relative strength during a big down day in the market. Let’s take a look at a few reasons why First Solar is a bright spot in the alternative energy sector.
The Largest Manufacturer of Solar Systems and Solar Panels in the U.S.
Solar power has been around for quite a while now, and you might even remember a time when former president Jimmy Carter had solar panels installed onto the roof of the White House. However, the technology behind solar panels has greatly improved over the last decade thanks to innovative businesses like First Solar. It’s a company that designs and manufactures solar modules using its proprietary thin-film semiconductor technology. First Solar can create complete solar modules faster and at a lower cost than its competitors, which is part of the reason why it has become one of the leading solar energy companies.
Many of First Solar’s customers own and operate solar power plants which require a lot of solar panels to function, but the company also sells solar modules for residential customers. It’s a company with a very strong balance sheet thanks to over $1.4 billion in net cash as of Q3. This is a big plus for investors since the solar manufacturing business can be very capital intensive. First Solar is also a big beneficiary from U.S. state renewable energy requirements and federal tax credits, which is another positive for investors to consider.
Blowout Earnings Report
I mentioned earlier that many alternative energy companies were seeing declining sales during the first half of the year thanks to the pandemic, but Q3 saw sales bounce back in a big way for First Solar thanks to its international sales and an increase in the volume of solar modules sold to third parties. The company reported Net Sales of $928 million in Q3, which was an increase of over 30% from the prior quarter and 70% year-over-year. Q3 EPS also surged by over 300% from the previous quarter.
This strong report should help to give investors confidence that alternative energy stocks can be resilient during times of economic uncertainty. It also helps to reinforce the idea that First Solar’s competitive advantage is helping it grow in international markets. It’s worth mentioning that First Solar’s management team reinstated its FY20 guidance, which tells us that the company is confident in executing during the final months of its fiscal year. The stock was up over 12% in the trading session following the earnings release, so it might be best to wait for a better entry point if you are interested in adding shares.
Recent Deal with General Motors (NYSE:GM)
If you are looking for proof that the widespread adoption of alternative energy sources is accelerating, look no further than First Solar’s recent announcement of a deal with General Motors (NYSE:GM). First Solar will be providing solar energy to three of GM’s plants in the Midwest as the automobile manufacturer has plans to source 100% of its U.S. facilities with renewable energy by the year 2030. It’s incredible to think that a major factory can be powered entirely by solar energy, and First Solar is making it happen.
These types of headlines are exactly what alternative energy investors love to see and prove that First Solar is one of the best companies to own in the sector. The solar power industry is poised to continue growing at a rapid pace over the next decade, and the fact that even the automotive industry is on board with clean energy should tell you all you need to know about the growth prospects of a company like First Solar.
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