TSL is a much more secure company than ASTI (what a miss yesterday, this cold hand :(, congrats to the ones who are still holding), with very strong revenue and EPS growth.
So, on TSL it was easy to make a full video analysis with comprehensive and maybe even conservative long term estimates pointing to a 35% average annual price per share growth rate for the next 10 years:
<object width="500" height="450"><param name="movie" value="http://www.youtube.com/v/wjl6ctDQkXo"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/wjl6ctDQkXo" type="application/x-shockwave-flash" wmode="transparent" width="500" height="450"></embed></object>
The fact that TSL has 87% of its revenues coming from Germany alone and 100% of them coming from Europe is very encouraging, because just imagine when they expand their sales force throughout America and Asia :o
I gave it a 9 on a 1-10 scale and I recommend buying it for the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php), 6.66% of capital as always.
(if I had bought yesterday I would now be 8% ahead, but we're all humans, and I was sick yesterday)
David, I am still holding ASTI - only for the technical reasons, as you also mentioned the chart looked short term bullish. Could you please just comment on the technical development for ASTI and suggest an exit point?
Thank you.
Berloga.
Quote from: berloga on March 23, 2007, 09:28:04 AM
David, I am still holding ASTI - only for the technical reasons, as you also mentioned the chart looked short term bullish. Could you please just comment on the technical development for ASTI and suggest an exit point?
Thank you.
Berloga.
I would sell today at the open on the current gap up, as I don't see prices above $11 as a short term possibility (but I can be wrong).
I bought TSL a few days back David. Makes me feel much better about my purchase to have you in the stock. ;)
Quote from: ygtrdr on March 23, 2007, 09:38:47 AM
I bought TSL a few days back David. Makes me feel much better about my purchase to have you in the stock. ;)
Thanks for your kind words ygtrdr :)
The past:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=34808;image)
And the expected future:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=34809;image)
... show an incredible growth story. If the company doesn't spoil it all by diluting shareholder's value too much (I'm considering 3% a year on average going forward), I believe we have an outstanding pick here.
I'll keep holding TSL.
From what I've been reading about TSL, the only barrier to growth is the company's manufacturing capacity. TSL is expected to double its capacity in 2007:
«As of September 30, 2006, we had an annual module manufacturing capacity of 59.8 megawatts (MW). We expect to increase our total annual module manufacturing capacity to 75 MW by the end of 2006 and to 150 MW by the end of 2007.»
Technically the stock still has a small gap opened between $42.7 and $43, so it may retrace just a bit more, but with the fundamentals I see I don't expect it to stay down for long.
I'll keep studying and holding TSL.
The growth of the solar market is impressive, I should look for more solar energy plays:
«The solar power market has grown significantly in the past several years. According to Photon Consulting, an independent solar energy research firm, the global solar power market as measured by annual solar power production increased by 41.7% from 1.2 gigawatt (GW) in 2004 to 1.7 GW in 2005. During the same period, solar power industry revenues grew from approximately $8 billion in 2004 to approximately $12 billion in 2005. Photon Consulting projects that solar power industry revenues and solar power production will reach $72 billion and 10.4 GW, respectively, by 2010. Solar power production is expected to grow at a compound annual growth rate, or CAGR of 43.7% from 2005 to 2010, driven largely by rising grid prices, government initiatives and new distribution channels, according to Photon Consulting.»
For now I have TSL and I won't leave it.
David - if you are looking for other solar stock, here are the ones I have on my wish-list:
STP
CSIQ
...and then good, little SOEN.OB, wich I bought at 1.01 and more at 1.34 ;)
DSTI is a "maybe" because of recent problems, but it seems they're fixing those
ESLR is also a "maybe" - I'm not quite sure why they hav had this recent turbulence?
Quote from: cumulina on March 28, 2007, 01:57:00 PM
David - if you are looking for other solar stock, here are the ones I have on my wish-list:
STP
CSIQ
...and then good, little SOEN.OB, wich I bought at 1.01 and more at 1.34 ;)
DSTI is a "maybe" because of recent problems, but it seems they're fixing those
ESLR is also a "maybe" - I'm not quite sure why they hav had this recent turbulence?
Thanks for these suggestions cumulina, I'll put them on today's poll. Congrats for SOEN.OB, huge rally :)
As for TSL there wasn't any news out and the stock continues to trade within that symmetrical triangle formation. There's still a small gap opened between $42.7 and $43. The stock may go down that bit to close the gap before jumping higher, respecting the indication given by the very attractive fundamentals.
TSL was the only green light in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) yesterday, so I couldn't be more pleased with this holding. Technically the stock is about to decide if it wants to break the triangle symmetrical pattern to the upside or the downside. I believe that, given the fundamentals, it will breakout on the upside and I'll keep holding TSL.
The only fear I have on TSL is dilution, because it is a recent IPO stock and usually those dilute shareholder's value right after the IPO.
The balance sheet doesn't show that need, since the current ratio is 2.25 and working capital is $110 M, but we never know. Anyway, I saw 35% average annual long term share price appreciation, already considering 3% annual dilution, so, if instead of 3% we get 10% dilution, TSL would still be a great long term holding.
I'll keep holding TSL.
I believe it is important for TSL to make a bullish breakout of the current symmetrical pattern formation, because that will show everybody that the company isn't conducting a massive dilution campaign. My long term estimates point to about 3% average annual dilution and I wouldn't like to see much more than that.
Currently support stands at $42.74 and resistance at $47.85. The technical pattern will close by April's end. I'll keep holding TSL.
Can we look at the grander triangle, like this? In this case TSL must break up sooner than later.
Quote from: berloga on April 03, 2007, 09:40:57 AM
Can we look at the grander triangle, like this? In this case TSL must break up sooner than later.
Sure, why not? Technical analysis is an art, not a science :)
QuoteCurrently support stands at $42.74 and resistance at $47.85.
TSL approached the $47.85 resistance level, as the high of the day was $47.6. Tomorrow this resistance will stand at $47.72. Volume picked up considerably to 1.2 million shares changing hands. If the stock is able to breakout of this symmetrical triangle formation, the dilution fear will be somewhat put aside, and TSL will surely run to a new all time high above $51.
Let's see what happens from a technical standpoint, since we already know fundamental analysis gives us a quite attractive long term proposition.
I'll keep holding TSL.
Looks like TSL and SPWR both making breakout attempts today.
Sorry if this doesn't belong here David. I'm not sure you saw it posted the other day. A little about Sun Power SPWR, if you're still interested in another solar stock. TSL still looking good also.
Quote from: BigSully1 on March 30, 2007, 12:20:20 PM
Regarding solar stocks, there was a mention in yesterdays IBD about San Jose, Ca based Sun Power, SPWR.
IBD says it is climbing the right side of a seven week consolidation, riding just below it's Feb. high of 47.98. Went public 11/05, turned profitable 06. 24 analcysts, consensus is for 90% growth this year. earnings growth 800% in Q4 and stepped up in each prior 4Q's against year earlier losses. Consensus is 375% earnings growth for Q1. IBD says RS and A-D registered new highs in last week. Maybe another good one to watch.
Some interesting articles;
http://biz.yahoo.com/seekingalpha/070312/29269_id.html?.v=1
http://biz.yahoo.com/seekingalpha/070320/30022_id.html?.v=1
http://blogs.wsj.com/energy/2007/03/08/throwing-dollars-at-the-sun/
Yes, SPWR looks quite interesting BigSully1, I'll try to take a more in depth look at it before tomorrow's open.
We got our bullish breakout on TSL yesterday! This is a sign of "no heavy dilution going on", or the stock would have probably broken down. The next stop is the all time high at $50.94.
For tomorrow's update I'll apply my new valuation model to TSL to see what we get, given today's fundamental trends.
I'll keep holding TSL.
I read the information that TSL had 87% of revenues coming from Germany and 100% from Europe, but after all it isn't quite like that (ok, now I see those were 2005 numbers), as we can see on the following table taken out of TSL's IPO prospect:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35269;image)
It is still amazing how this Chinese company with production in China has 88.9% of its revenues coming from Europe.
I'm eager to get the 1st quarter results to see if there was any increase to the latest share count of 2,172,564,728 ordinary shares, or 21,725,646 ADS, made in December 31st, 2006. I'll extrapolate the increase I get for the 1st quarter 2007 to the full year and get the "dilution factor" for TSL from that estimate, so it better not be too high. At the initial video analysis that justified this investment, I estimated a dilution factor of just 1.03 per year, on average, but I fear that's too low. We'll just have to wait for the actual 1Q 2007 results to find out.
Over the following updates we'll work to get the other three working variables of my new valuation model, the revenue CAGR, net profit margin and estimated earnings multiple.
I'll keep holding TSL.
We still don't have information about the expected dilution factor, but the chart below isn't one of a company that is diluting :)
I've decided to build the model with the limited information we have:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35364;image)
Ok, given the four estimates I have on the model, the share price CAGR is 28.1% and the optimal selling price now is $72.93. Let's check the context of those four variables:
1) As for the dilution factor I maintained the 1.03 estimate. I'll adjust this estimate as soon as we get the 1st quarter numbers;
2) I put 2 as the revenue CAGR, but probably this is too conservative, even though it seems such a high number (it means 100% revenue compound annual growth rate). How come this number can be conservative, you ask. Well, because revenue grew 319.8% in 2006 from 2005 levels. If this growth pace were to continue, the revenue CAGR estimate would then be 4.198, and that would make TSL's estimates and corresponding share price shoot to the moon. But 2006 growth came from a very small base, and I don't expect it to be maintained. We'll refine estimates when we get the Q1 numbers.
3) As for the net profit margin estimate, perhaps I'm also being conservative, since I'm expecting it to decline to 10% from the current 11.82%, and that shouldn't happen as revenue grows. I need to check the historical (even though there's not much history) net profit margin over the next updates to refine this estimate;
4) The 27 EPS multiple estimate seems consensual to me, since 27 is the Semiconductor - Specialized industry average (http://finance.yahoo.com/q/co?s=TSL) (hmm, I don't think TSL is well inserted in this industry, it should be more like Alternative energy, don't you think?)
You can see my estimates are on shaky ground here, but it seems there's more room for upside than for disappointment. The market agrees, as the stock closed at a new all time high yesterday.
I'll keep holding TSL.
Q1 results for TSL are near now, I should keep holding the stock and wait for those numbers to refine estimates, since there isn't much financial history to make comparisons (the company's IPO was just last December).
I'll keep holding TSL.
Nothing new on TSL today, as I need to keep waiting for Q1 results to refine estimates some more, since TSL's financial history is quite limited. The chart points North.
I'll continue holding TSL.
I think JASO is worth a look, has better margins then TSL and is profitable. I have not done any analysis but was wondering if David can look into JASO.
Quote from: stocky on April 13, 2007, 02:43:05 AM
I think JASO is worth a look, has better margins then TSL and is profitable. I have not done any analysis but was wondering if David can look into JASO.
I put JASO on my note book to cover early next week, since today I don't have time due to personal reasons. Monday I expect to restart covering three new stocks per trading day, and JASO will be one of the firsts.
The current valuation model for TSL is the following:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35538;image)
With the current fundamental information and the estimates I derive from the limited publicly available information about TSL (since it is such a recent IPO stock), the share price CAGR I get is 23.7% and the optimal selling price is $66.73.
(there was an error in a formula in the previous model calculation, fortunately this didn't have a dramatic impact on results).
I'll keep holding TSL, as I wait for the Q1 2007 results that hopefully will allow me to refine these estimates that are based on shaky ground, due to the lack of historical information on TSL.
David, if TSL reaches $66.73 before quarterly report, will it be an automatic sell?
Quote from: realcoolhead on April 13, 2007, 04:16:14 PM
David, if TSL reaches $66.73 before quarterly report, will it be an automatic sell?
Well, I'm not happy with one of my estimates on TSL, and that is the EPS multiple. It should be higher, and now that I mention it, as incredible as it may seem, the Semiconductor - Specialized industry average earnings multiple jumped from 27 yesterday to 42.93 today:
http://finance.yahoo.com/q/co?s=TSL
This will change the share price CAGR and the optimal selling price by a good amount (to the better), I don't think we'll be able (or willing) to sell TSL before the Q1 earnings release that will shed new light into my forecasting efforts.
Now that I saw this change I got curious on how Yahoo Finance calculates these industry averages.
Anyway, I'll run the model for TSL with this new EPS multiple estimate when I update the analysis on all holdings.
Nice to see you ;)
And now I see 27 again on the link I just provided you ???
Definitely, the industry average, at least the way Yahoo calculates it, probably isn't the best way to forecast the future EPS multiple. I wonder which way that might be?
As I go deeper on these issues I'm getting to the conclusion that I need a model to forecast each one of the four variables of the major model. The more I know, the more I need to know :)
I think this helped TSL to move up quickly this week :
ADRs of Chinese Companies Mixed After Shanghai Index Hits All-Time High but Ends Lower
NEW YORK (AP) -- U.S.-traded shares of Chinese companies were mixed Friday, after the benchmark Shanghai index hit an all-time high but ended the day lower.
Chinese investors sold to lock in profits from a nine-day winning streak. The Shanghai Composite Index slipped 0.4 percent to 3,518.27 points Friday, after hitting an all-time high of 3,563.86 during the session.
Analysts expect more selling pressure next week, as investors take a cautious stance ahead of the release of China's first-quarter gross domestic product data on Thursday.
great pick David :)
Quote from: David Randolph on April 13, 2007, 04:47:04 PM
Quote from: realcoolhead on April 13, 2007, 04:16:14 PM
David, if TSL reaches $66.73 before quarterly report, will it be an automatic sell?
Well, I'm not happy with one of my estimates on TSL, and that is the EPS multiple. It should be higher, and now that I mention it, as incredible as it may seem, the Semiconductor - Specialized industry average earnings multiple jumped from 27 yesterday to 42.93 today:
http://finance.yahoo.com/q/co?s=TSL
This will change the share price CAGR and the optimal selling price by a good amount (to the better), I don't think we'll be able (or willing) to sell TSL before the Q1 earnings release that will shed new light into my forecasting efforts.
Now that I saw this change I got curious on how Yahoo Finance calculates these industry averages.
Anyway, I'll run the model for TSL with this new EPS multiple estimate when I update the analysis on all holdings.
Nice to see you ;)
Considering what we've been discussing on this thread about TSL earnings multiple, I've decided to apply the number 35 for that particular estimate, and the model stays like this:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35627;image)
So, given these estimates that I believe are reasonable, TSL's expected share price CAGR is 32.2% and the optimal selling price is $86.5.
I'll keep holding TSL.
I'm in awe with TSL's bull power, up 17% yesterday :o
The valuation model continues to point $86.5 as the optimal selling price:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35701;image)
That's where I'll take profits, because I don't see how we can stretch estimates more to the positive side.
The expected share price CAGR went down to 25.3%, I hope momentum takes the stock up to $86.5 as quickly as possible, but I'm prepared to wait several months if I have to. For now I'll keep on holding TSL, already the second biggest gainer of the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php).
It never feels good to take a 10% punch in the stomach like the one we had today on TSL, but we need to put things into perspective, we can't be more anxious now that TSL closed at $61.78 than what we were when the stock closed at $43.13, just a couple of weeks ago, can we? ;D
Well, we feel more anxious now because we're humans. Jesse Livermore explained it quite well more than 80 years ago, in Reminiscences of a Stock Operator:
«The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that everyday will be the last day - and you lose more than you should had you not listened to hope - to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out - too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.»
I'll stick to my estimates and forecasts:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35744;image)
TSL may very well go down some more to close the gap at $59, but I'll continue ignoring the short term fluctuations and will only sell at what I perceive to be the optimal selling price given the publicly known fundamental information: $86.5.
Nothing new on TSL, the valuation model says "sell only at $86.5" (http://www.3stocksonfire.org/trading/index.php?topic=9201.msg93376#msg93376), so I'll keep holding TSL.
Hey Guys,
JFYI and only if you really want to take a position in TSL....
It is trading wildy today!
It is down 9% as of right now.
This would be a GREAT buying opportunity.
I put my money where my mouth is and just bought some more shares.
Wxmang
Hi David:
TSL does not depend on polysilicone like JASO and others, and polysilicone is getting expensive because of its higher demand. would this give an advantage to TSL over the others?. i would appreciate your comments on this. thanks.
I'm not sure what you mean by they don't depend on polysilicon. they use recycled silicon though, and they (Trina) claims they can make ingots w/up to 80% reclaimed silicon, mostly from scraps from the tech sector such as broken wafers. They've already secured about 80% of silicon needs for 2007 and about 50% for 2008. Hopefully Trina will someday make their own silicon.
Much of the higher margins are believed to be in the cell and module side and not as much in wafering. I believe Trina recently announced the opening of their new cell line and should be in operation soon, if not already.
Ugly day for TRINA. I guess it should have been expected after the very steep extension from breakout just a short time ago.
When I came home from coffee to see how things closed and I looked at TSL, I honestly felt like throwing up. Down 12% on the day, it makes me sick. I bet it made me as sick as the people that sold in early March, between $42 and $35, when correction 1 unfolded:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35853;image)
The only difference between me and those people is that I have strong hands given by a reasonable fundamental analysis that shows me TSL will be back at new highs, if given enough time, because at current prices and given current fundamental trends, TSL is giving a 34% long term return to investors, and that return is unsustainable, that means, the stock needs to go up for return to go down:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35854;image)
It will probably take a couple of months or more, but I'm pretty much certain I'll be able to sell TSL at my $86.5 target, so I'll keep holding TSL.
Quote from: magu on April 19, 2007, 03:41:21 PM
Hi David:
TSL does not depend on polysilicone like JASO and others, and polysilicone is getting expensive because of its higher demand. would this give an advantage to TSL over the others?. i would appreciate your comments on this. thanks.
I'll work on polysilicone costs for tomorrow's update, thanks for the question :) Great research work BigSully, applaud :)
Thanks for your answer and info BigSully1 .
It is my understanding that Trina uses Monocrystalline Silicone which is much cheaper to produce than Polysilicone.
pulledback to its 13 dma $56 is support, good bye if it hold tomorrow.
Quote from: magu on April 19, 2007, 06:48:52 PM
Thanks for your answer and info BigSully1 .
It is my understanding that Trina uses Monocrystalline Silicone which is much cheaper to produce than Polysilicone.
Hey Magu, I didn't know that. Thanks for the lesson. But don't you mean silicon and not silicone?
Quote from: yukiii on April 19, 2007, 07:03:00 PM
pulledback to its 13 dma $56 is support, good bye if it hold tomorrow.
Believe 13ema and 20 ema are more appropiate in this case
We will se a strong open today :)
First of all let me copy/paste the WSJ article that soxguy gently posted on JASO's thread:
MarketWatch / Weekend Investor
Chinese Solar-Energy Companies
May Be Next Stocks to Burn Investors
By HERB GREENBERG
April 21, 2007
Years ago, when the disk-drive industry was booming and Seagate Technology couldn't add capacity fast enough, the company's chief executive -- the late Alan Shugart -- was asked what would happen when capacity exceeded demand. His answer was akin to, "We'll worry about it then."
Indeed they did, with layoffs, plant closings and price cuts -- something investors, who watched the share price slide, likely won't forget. Such is life maneuvering amid the boom-bust-boom world of technology, where the experience of Seagate is more the norm than the exception.
Next on tap to learn that supply-demand lesson the hard way just might be investors in the handful of Chinese solar companies that have gone public in the U.S. in the past year. These companies have come out of nowhere -- some reformulated from industries unrelated to solar -- to become stock-market darlings amid the recent infatuation with alternative energy.
The solar crowd includes such companies as Trina Solar Ltd., which has been in the solar business since late 2004 (it originally made aluminum siding) and now has a market value of more than $1 billion after going public late last year; JA Solar Holdings Co., in business since May 2005, making products since April 2006, publicly traded in the U.S. since February and now with $1 billion-plus market value; Solarfun Power Holdings Co., which went public late last year and is now valued at nearly $1 billion; and Canadian Solar Inc., another recent initial public offering with China roots that started in 2001 as a maker of solar car chargers.
JA Chief Executive Samuel Yang says a few more Chinese solar upstarts are believed to be waiting in the wings to do an IPO. Plenty more, he says, are looking for ways to cash in on the boom, including companies that used to make clothing and shoes. "Everybody thinks it is such a lucrative industry," he says. To a large extent, it has been. Most of the young publicly traded companies have posted impressive sales and profit growth. That's right: they are posting profits -- lots of it.
But before investors get too excited, consider that much of that growth has been tied to sales in Germany, the largest market for solar energy, where purchases for large fields of solar panels have been subsidized by the government. Piper Jaffray & Co. analyst Jesse Pichel, regarded as one of the most seasoned in a rapidly growing field of solar analysts, says that is why he regards much of the sales and profit at these companies as "funny money" and "welfare." "There's a lot of risk that the subsidies don't continue in Germany and I think they will get reduced," he says. That, in turn, will cause demand to slow.
That gets us back to this whole supply-demand thing. When supply outstrips demand, prices tend to fall. That is something to keep in mind because even as demand is slowing, many of these companies are pulling out all stops to expand capacity -- and they are doing it as more competitors are springing up. Consider Canadian Solar, which makes solar panels, which contain solar cells that absorb sunlight. It attributed a fourth-quarter loss in part to a decline in prices even as plants are running around the clock. "We're expanding capacity, but we're expanding to meet firm orders," Chief Executive Shawn Qu says.
While demand in such countries as Spain, South Korea and the U.S. may strengthen, and the business as a whole may get much stronger in future years, Mr. Pichel says it isn't rising as fast as the growth in capacity. As a result, he believes profit margins will continue to come under pressure for the time being as companies start selling below market prices to gain share. Mr. Yang and Mr. Qu believe there will be a shakeout in the industry and that their companies, as low-cost providers, will be among the survivors. Executives of Solarfun and Trina couldn't be reached. Still, between here and there -- wherever there is -- a lot will happen before it gets sorted out. Meantime, there is likely to be a comeuppance that investors in these companies will wish they had anticipated -- as was the case with Internet stocks, memory-chip stocks and, oh yes, disk-drive stocks. History, on Wall Street, has a way of repeating itself.
Since the above is an article published on the WSJ weekend edition that will likely have a short term impact on TSL and JASO, today's update will be dedicated to it (I'll take care of the cost of production issue over the next update):
QuoteYears ago, when the disk-drive industry was booming and Seagate Technology couldn't add capacity fast enough, the company's chief executive -- the late Alan Shugart -- was asked what would happen when capacity exceeded demand. His answer was akin to, "We'll worry about it then."
Indeed they did, with layoffs, plant closings and price cuts -- something investors, who watched the share price slide, likely won't forget. Such is life maneuvering amid the boom-bust-boom world of technology, where the experience of Seagate is more the norm than the exception.
Bad example. Seagate is still 88% above its $11.50 debut price in November 2002. And the stock tripled shortly after the IPO:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35962;image)
Another addition to this is that STX today is a $11.8 B market cap company, about 10 times larger than any of the solar companies the article talks about. If Seagate is a problematic company I wonder what a good company would be like for Herb Greenberg.
QuoteNext on tap to learn that supply-demand lesson the hard way just might be investors in the handful of Chinese solar companies that have gone public in the U.S. in the past year. These companies have come out of nowhere -- some reformulated from industries unrelated to solar -- to become stock-market darlings amid the recent infatuation with alternative energy.
Like Tokyopua said on JASO's thread, many other companies changed their business completely and are now some of the largest companies in the world, like Hitachi in Japan that was a shipping company before being high-tech, and Nokia, which before doing mobile phones was a paper and rubber company (http://www.nokia.com/A4303001).
You could also say, about Google: "this company was formed just a few years ago by two college kids, how can it now be worth $150 B?"
QuoteThe solar crowd includes such companies as Trina Solar Ltd., which has been in the solar business since late 2004 (it originally made aluminum siding) and now has a market value of more than $1 billion after going public late last year; JA Solar Holdings Co., in business since May 2005, making products since April 2006, publicly traded in the U.S. since February and now with $1 billion-plus market value; Solarfun Power Holdings Co., which went public late last year and is now valued at nearly $1 billion; and Canadian Solar Inc., another recent initial public offering with China roots that started in 2001 as a maker of solar car chargers.
The article has the merit of making me go deeper on my search for information related to JASO's market cap and number of ADS outstanding. I'll write about this issue on JASO's thread.
QuoteJA Chief Executive Samuel Yang says a few more Chinese solar upstarts are believed to be waiting in the wings to do an IPO. Plenty more, he says, are looking for ways to cash in on the boom, including companies that used to make clothing and shoes. "Everybody thinks it is such a lucrative industry," he says. To a large extent, it has been. Most of the young publicly traded companies have posted impressive sales and profit growth. That's right: they are posting profits -- lots of it.
We have what, 4 or 5 Chinese companies making solar cells in the stock market now. What if they're 10 or 20, do you see any problem with that? I don't, because solar energy is going to be a huge sector in the future, perhaps as big or even bigger than the oil sector.
QuoteBut before investors get too excited, consider that much of that growth has been tied to sales in Germany, the largest market for solar energy, where purchases for large fields of solar panels have been subsidized by the government. Piper Jaffray & Co. analyst Jesse Pichel, regarded as one of the most seasoned in a rapidly growing field of solar analysts, says that is why he regards much of the sales and profit at these companies as "funny money" and "welfare." "There's a lot of risk that the subsidies don't continue in Germany and I think they will get reduced," he says. That, in turn, will cause demand to slow.
I don't think this man knows how politics works in Europe. When subsidies are put in place, especially if they're related to energy independence and the environment, they last decades. Germany always leads Europe, next will come France, Spain, Italy, the Uk, etc. Even Portugal just started subsidizing solar energy and GE built the largest "solar farm" in the world in Alentejo, a Portuguese province.
QuoteThat gets us back to this whole supply-demand thing. When supply outstrips demand, prices tend to fall. That is something to keep in mind because even as demand is slowing, many of these companies are pulling out all stops to expand capacity -- and they are doing it as more competitors are springing up. Consider Canadian Solar, which makes solar panels, which contain solar cells that absorb sunlight. It attributed a fourth-quarter loss in part to a decline in prices even as plants are running around the clock. "We're expanding capacity, but we're expanding to meet firm orders," Chief Executive Shawn Qu says.
Slowing demand? Supply outstripping demand? I believe the author is looking 10 years down the road, he's like talking about the technology sector in the early 1990's, eight or nine years ahead of the curve. The use of sunlight to produce electrical energy is just starting, I believe anyone with a bit of common sense sees that.
QuoteWhile demand in such countries as Spain, South Korea and the U.S. may strengthen, and the business as a whole may get much stronger in future years, Mr. Pichel says it isn't rising as fast as the growth in capacity. As a result, he believes profit margins will continue to come under pressure for the time being as companies start selling below market prices to gain share. Mr. Yang and Mr. Qu believe there will be a shakeout in the industry and that their companies, as low-cost providers, will be among the survivors.
Companies like TSL and JASO are building the future of the planet Earth using renewable and clean sources of energy like the sun. And they're making it in an affordable and economically sensitive way. Finally a few companies are able to do that, using very cheap and competitive Chinese labor force. And Herb Greenberg writes this article trying to spoil this major achievement. Fortunately he's just another man with an opinion that will be able to take stocks down at Monday's open, but not much more than that, I believe.
QuoteStill, between here and there -- wherever there is -- a lot will happen before it gets sorted out. Meantime, there is likely to be a comeuppance that investors in these companies will wish they had anticipated -- as was the case with Internet stocks, memory-chip stocks and, oh yes, disk-drive stocks. History, on Wall Street, has a way of repeating itself.
There's no bubble in these Chinese solar companies. Internet companies in the late 90's had little revenues and huge losses. That's not the case here, where we have extremely strong revenue growth and really fat profits. The comparison doesn't make any sense. Even admitting there's a bubble in Chinese solar energy related companies (which I don't admit) that bubble would be just starting.
All in all, the article doesn't change my views on TSL, it reinforces them. As for JASO we'll talk on that stock's thread, but there's conflicting information about the number of ADS outstanding.
I'll keep holding TSL.
I agree that Solar companies with real profits and sales may prove to be bigger opportunity then the Internet dot coms. Another company FSLR has lot of positioning by the walton family of Walmart. If they were not such a good business acume ppl they would not have been the largest private employer in US.
Late last year there was a rumor of a supply glut in Germany that shook solar stocks. That rumor just didn't pan out as evidenced by 4Q numbers that market conditions are not declining in Germany. I believe Germany is still the fastest growing solar market in the world thanks to their new regulations. Some analysts believe that when you put solar power into the German context, what you're getting is a guaranteed payout for 20 years.
Solar power is still heavily dependent on governmant support and we are definitely seeing a rising global trend in that support. Italy and Spain are just beginning to promote support. And then there is US bill H.R. 550......
The Department of Energy expects worldwide electricity consumption to double by 2030, and all that energy's got to come from somewhere.
As to Trina's very large dependence on Germany, sure it's definitely some risk, but I think we will start to see Trina post rapid gains in other global markets also.
As far as I can tell, demand is greatly exceeding supply in this solar market and until proven otherwise, this sector has a great future ahead.
Quote from: stocky on April 22, 2007, 11:46:11 AM
I agree that Solar companies with real profits and sales may prove to be bigger opportunity then the Internet dot coms. Another company FSLR has lot of positioning by the walton family of Walmart. If they were not such a good business acume ppl they would not have been the largest private employer in US.
Yes, the difference is there's real demand and real profits being made in the alternative energy sector right here right now, not just expectations of future revenues and earnings that we know now were totally wacky for most companies in the internet sector in late 99.
Quote from: BigSully1 on April 22, 2007, 11:57:34 AM
Late last year there was a rumor of a supply glut in Germany that shook solar stocks. That rumor just didn't pan out as evidenced by 4Q numbers that market conditions are not declining in Germany. I believe Germany is still the fastest growing solar market in the world thanks to their new regulations. Some analysts believe that when you put solar power into the German context, what you're getting is a guaranteed payout for 20 years.
Solar power is still heavily dependent on governmant support and we are definitely seeing a rising global trend in that support. Italy and Spain are just beginning to promote support. And then there is US bill H.R. 550......
The Department of Energy expects worldwide electricity consumption to double by 2030, and all that energy's got to come from somewhere.
As to Trina's very large dependence on Germany, sure it's definitely some risk, but I think we will start to see Trina post rapid gains in other global markets also.
As far as I can tell, demand is greatly exceeding supply in this solar market and until proven otherwise, this sector has a great future ahead.
I couldn't have said it better BigSully1, you made today's update, thank you :)
Oops, we still have magu's interesting question about the difference in the cost of production between Trina and others:
Quote from: magu on April 19, 2007, 03:41:21 PM
Hi David:
TSL does not depend on polysilicone like JASO and others, and polysilicone is getting expensive because of its higher demand. would this give an advantage to TSL over the others?. i would appreciate your comments on this. thanks.
Well, I have 10% for net profit margin for both, TSL and JASO. This issue can lead me to increase my net profit margin estimate for TSL and perhaps lower it for JASO, so this is a very important issue. First of all the question I need to raise is: "is there an organized market for polysilicon and is the price of this commodity rising? By how much?"
Let me search for the answer to this question. It seems there isn't an organized market for polysilicon. There's a lot of talk about a severe shortage of the material, but apparently supply is also expanding at a very rapid pace:
Increase in Polysilicon Production May Not Ease Chinese Shortages (http://www.worldwatch.org/node/4103)
The world wants to use the power of the sun to generate electricity and then put everything electrical to suppress the constant and dangerous need of oil. Germany's government took the first step, subsidizing Chinese manufacturers to get them producing affordable solar panels. But others will follow. I bet that when the Bush administration sees what the Germans are doing, it will follow suit. The West wants to diminish the Muslim countries power by reducing our need for oil.
These global political trends usually last decades (or maybe even centuries).
I have to dig more on this polysilicon issue, mainly the difference between TSL and other producers.
I'll keep holding TSL.
Quote from: magu on April 19, 2007, 06:48:52 PM
Thanks for your answer and info BigSully1 .
It is my understanding that Trina uses Monocrystalline Silicone which is much cheaper to produce than Polysilicone.
I've searched for explanation on this issue and found the following link, curiously at HOKU's website:
HOKU scientific - Solar Basics (http://www.hokuscientific.com/solarbasics.html)
My highlights are:
«There are
two processes for making ingots from polysilicon: the
monocrystalline and the
multicrystalline process. To make monocrystalline ingots, a single crystal of polysilicon is grown, whereas, multicrystalline ingots are made by melting chunks of polysilicon together in a crucible to form a large block of multicrystalline polysilicon, which is then cut into smaller bricks. The monocrystalline ingot or the multicrystalline brick is then cut into thin wafers, typically using a cable saw. The end product is either a monocrystalline or a multicrystalline silicon wafer.»
«PV cells made from multicrystalline wafers may have efficiencies in the range of 13-18%, whereas
PV cells made from monocrystalline wafers typically have higher efficiencies in the range of 20%, but are more expensive to produce.»
It seems the monocrystalline process is the most expensive, yet more efficient.
At first sight I don't find evidence of TSL having a cost advantage over its competitors, what do you think magu? Thanks :)
For now I'll maintain my estimates for TSL (http://www.3stocksonfire.org/fundamental.model.php?ticker=TSL&portfolio=main), and will only sell at the optimal selling price of $86.5.
Efficiency is the key in producing the energy, yet cost is sure a factor. I don't think it cost a lot more to produce the monocrystal type silicon. It also may be more durable.
David, take a look at WFR. It is a large manufacturer of polycrystal silicon. I sold it at $38 and it is $65 now, as always with no model in mind...
Quote from: berloga on April 25, 2007, 09:22:21 AM
Efficiency is the key in producing the energy, yet cost is sure a factor. I don't think it cost a lot more to produce the monocrystal type silicon. It also may be more durable.
David, take a look at WFR. It is a large manufacturer of polycrystal silicon. I sold it at $38 and it is $65 now, as always with no model in mind...
I'll look at WFR, just put it on my "stocks to cover list". But it is already a $15 B market cap company, I'm more interested in smaller plays.
As for TSL, the crowd keeps saying bearish things about it, yet the stock is building the basis for another bull run. My valuation model says "sell at the optimal price of $86.5" (http://www.3stocksonfire.org/fundamental.model.php?ticker=TSL&portfolio=main). I'll do that when I have the chance, in the meantime I'll keep on holding TSL.
I've just noticed that TSL and JASO are the second and third less attractive stocks of the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php). And this with pretty strong and optimistic views of the future, which concerns me.
And what if, instead of a 3% dilution we get, say, 6% dilution because these are recent Chinese IPO stocks, and we know how the Chinese like to dilute.
And, if instead of a 10% net profit margin, we get just 5%. I'll maintain a revenue CAGR of 100% (2 on the model) and a 35 times earnings multiple.
Let's check the valuation model under these changes:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36241;image)
The changes are quite dramatic, and the risks are very real in my opinion. I decide to take my 36% profit on TSL and look for better opportunities. The trading plan for TSL is SELL.
Quote from: David Randolph on April 27, 2007, 04:14:37 AM
I've just noticed that TSL and JASO are the second and third less attractive stocks of the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php). And this with pretty strong and optimistic views of the future, which concerns me.
And what if, instead of a 3% dilution we get, say, 6% dilution because these are recent Chinese IPO stocks, and we know how the Chinese like to dilute.
And, if instead of a 10% net profit margin, we get just 5%. I'll maintain a revenue CAGR of 100% (2 on the model) and a 35 times earnings multiple.
Let's check the valuation model under these changes:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36241;image)
The changes are quite dramatic, and the risks are very real in my opinion. I decide to take my 36% profit on TSL and look for better opportunities. The trading plan for TSL is SELL.
Yes I think you did right selling David. I already sold half the day of the last 16% rally. Sold the rest today. Also sold SPWR today.
David:
You made an excellent job on this stock - applaud
TSL ugly earnings miss. Bringing down solar stocks today?
I think TSL is worth another look right now. Killed earnings, seems like they are doing some work in house that is saving costs.
Nice margins. The stock reacted to the earnings decently well and then has since fallen to before the ER point. If solars aren't completely worthless as they have recently traded, then TSL will be a great investment. The stock trades at about a 21 trailing PE after announcing $0.61 in the most recent quarter.