Bronte Capital Presents Its Bearish Case On First Solar (FSLR)

Bronte Capital issued a report on why it’s short First Solar (FSLR) which by the way recently broke through a nearly one year down trend and cleared the 200 day moving average.  From a technical standpoint, it’s looking increasingly bullish, so the bearish case from Bronte is all the more interesting.  Of course, if the market falls off a cliff from these levels (and the Goldman Sachs (GS) news may make that a reality), then all stocks will get hit including FSLR.  Hat tip to Street Insider for the full report.  Below are the highlights.

Bronte believes First Solar will go the way of a Palm or Garmin where their pioneering technology leads to a few years of tremendous growth (which has since passed) but market share erodes with competition, eventually becoming a commodity.  They call FSLR a “fading growth stock.”

Regarding FSLR technology, they call the company’s thin film solar cells a “technological wonder”, but inferior in many ways to the more common polycrystalline cell.  They highlight that FSLR cells are less efficient, use more materials and degrade more over time compared to polysilicon.  They also remind of the diminishing cost advantage that FSLR once had due to plummeting poly prices.  Finally, while  they don’t see Applied Materials killing FSLR’s biz, they see the company as a threat.

I don’t see anything new in this argument outside of the App Materials threat and they are the same bearish arguments made when the stock was down around $100/share.  As for polysilicon prices, they will turn up again as will the price of all scarce commodities.  Sure, there will always be competition in any growth industry, but comparing FSLR to Garmin and Palm is in my opinion ridiculous.  I’ll take my cues from the technical action on FSLR which is bullish right now.  The stock is a bit overdone in the short term and probably needs to pull back, but the $100 level sure looks like a longer term bottom. 

Despite a plunging market today, FSLR is down just about 2.5% and holding at what is now support of the 200 day moving average.

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