First Solar Plummets

One of the powerhouses in the alternative energy sector this year was to be the solar energy giant First Solar (NASDAQ: FSLR) but as of yesterday, things have changed rapidly.

First Solar Inc. shares fell 10% on Wednesday making it the worst performer in the S&P 500. The cause of this was the company's lowered 2012 revenue estimate and missing on Wall Street's adjusted earnings target.

Two of the main causes for these disheartening figures are the higher manufacturing costs and the lower third-party solar module sales last year. The company says that 2012 sales will increase from $3.5 billion to $3.8 billion which is still down from its earlier estimate of $3.7 billion to $4 billion.

Taking a look at the past two days charts for First Solar, it looks as though many are running away from the stock as it has plummeted right from this morning's opening bell. At the time of writing, 10:56am Thursday, the FSLR price had dropped to $30.73 an almost 5% drop in less than three hours from it's $32.30 close yesterday.

The company says the installation of solar power plants sector of business continues in the right direction as it looks to stray away from its thin-film solar panel production. First Solar expects to install 1.2 gigawatts of solar power systems this year.

As for last year though, many costs for the company came from not only the manufacturing of the thin-film solar panels but also the high costs of replacing defective solar panels. Most of the panels that had to be replaced were made between June 2008 and June 2009 which is when the company had made changes in its manufacturing process. The panels had premature power loss associated with degradation within high temperatures, according to the company.

The company has stalled its plans to build a factory in Vietnam and has also put its Arizona factory on indefinite hold.

From the Wall Street Journal,

First Solar executives said Tuesday that the company would scale back production at its factories more sharply than previously anticipated to match supply with weaker-than-expected global demand for solar power.

First Solar Chairman and acting Chief Executive Mike Ahearn said the company is still working on a three-year plan to reorganize the business and to compete with fossil-fuel electricity generation in new markets such as India, the Middle East and Latin America.

The company's fourth quarter was labeled “rough” with adjusted earnings of $1.26, which fell short of Raymond James Independent Financial Advisors' lowered target for First Solar of $1.46 a share.

One major change along with the scaling back of manufacturing is the company will focus primarily on building and selling complete solar-power systems, rather than selling individual solar panels.

According to Market Watch,

The company faces declining profit margins and an oversupplied photovoltaic market. The cost advantage of First Solar’s thin film solar panels over traditional silicon-based solar panels has eroded, analysts said. On the plus side, First Solar is not “chasing profitless market share” and will cut costs by idling production in Germany.

First Solar, along with its competitors, have seen profits and stock prices drop significantly due to a slew of economic factors: a global oversupply of solar panels and manufacturing capacity, along with relatively weak demand have all driven prices lower than expected. Some companies have been forced out of business by such difficult economic and market conditions such as Solyndra LLC which had $500 million in government funding to play around with.

Some analysts, like Axiom Capital's Gordon Johnson, believes that First Solar's poor performance is a “game-changer” as he explains to CNBC below...