First Solar Powered Case: An Analysis
First Solar Case Analysis
Due to consideration of rising energy demand, global warming and nature of solar power, the solar industry has experienced a rapid development these years. First Solar, as one of the dominant companies in the industry, is suspected and scrutinized by CFRA for aggressive accounting practices. CFRA’s investigation aims at identifying potential risks in several areas, including revenue quality and recognition, inventory levels, customer and geographic diversification, warranty policies, production capacity growth, and supply chain. This case focuses on whether CFRA should flag First Solar and add it to the “biggest concern” list.
The stock of First Solar has always been popular among investors considering the company’s outstanding performance. The price-to-earnings ratios of First Solar from the last three years (2006 to 2008) were much higher than the industry average ratios. Therefore, it is reasonable to speculate that prospects for earnings in the future are great. Furthermore, positive opinions from the professional institutions, such as “outperform” and “buy”, gave investors much confidence. The analysts, as well as investors, believed that sustainable increasing earnings and new market expansion could provide solid growth prospects for First Solar.
Business Environment Analysis – PEST Analysis
Solar energy acting as a promising alternative energy marks a bright future of the solar industry. However, this emerging industry also faces lots of challenges. The following are some factors that could potentially influence First Solar’s operations in early 2009. Exhibit 1 provides a brief summary.
Political Environment
Because of high initial cost and severe pressure of innovation, the development of the solar industry badly needs governments to provide a good political environment. Tax incentives and subsidies are two common forms of assistance. It is exciting news that the US Treasury began to offer cash grants and loan guarantees to solar
Due to consideration of rising energy demand, global warming and nature of solar power, the solar industry has experienced a rapid development these years. First Solar, as one of the dominant companies in the industry, is suspected and scrutinized by CFRA for aggressive accounting practices. CFRA’s investigation aims at identifying potential risks in several areas, including revenue quality and recognition, inventory levels, customer and geographic diversification, warranty policies, production capacity growth, and supply chain. This case focuses on whether CFRA should flag First Solar and add it to the “biggest concern” list.
The stock of First Solar has always been popular among investors considering the company’s outstanding performance. The price-to-earnings ratios of First Solar from the last three years (2006 to 2008) were much higher than the industry average ratios. Therefore, it is reasonable to speculate that prospects for earnings in the future are great. Furthermore, positive opinions from the professional institutions, such as “outperform” and “buy”, gave investors much confidence. The analysts, as well as investors, believed that sustainable increasing earnings and new market expansion could provide solid growth prospects for First Solar.
Business Environment Analysis – PEST Analysis
Solar energy acting as a promising alternative energy marks a bright future of the solar industry. However, this emerging industry also faces lots of challenges. The following are some factors that could potentially influence First Solar’s operations in early 2009. Exhibit 1 provides a brief summary.
Political Environment
Because of high initial cost and severe pressure of innovation, the development of the solar industry badly needs governments to provide a good political environment. Tax incentives and subsidies are two common forms of assistance. It is exciting news that the US Treasury began to offer cash grants and loan guarantees to solar