First Solar's stock: From $20 to $220 in a year

It's official. First Solar is the Google of solar companies.

The Phoenix, Ariz.-based maker of cadmium telluride solar cells and panels has soared past the $200 a share mark. It was up to $230 today and is currently trading at about $219.

Remarkably, First Solar had an initial public offering in the middle of November 2006. The stock went out at $20 a share, so effectively, it has gone up in value by 11 times in a little less than a year. Google went out at $85 a few years ago and is now above $700. The numbers are bigger, but the multiple isn't.

First Solar's stock is being driven by rapid growth in revenue and profit. In the third quarter, revenue came to $159 million, more than triple the $40.8 million for the same period the year before. Revenue for the second quarter came to $77.2 million, so revenue essentially doubled in three months.

Net income for the third quarter came to $46.0 million or $0.58 per share, compared to $4.3 million or $0.06 per share the year before.

Analysts expected revenues of $120 million and earnings per share of 19 cents this quarter. The financial results were announced yesterday. There is some speculation fever built into the stock price. The price-to-earnings ratio currently hovers around 287, fairly high, even by 1998 Internet bubble standards. But the company is making money.

Unlike silicon solar-cell makers or the armies of CIGS (copper indium gallium selenide) manufacturers, First Solar extracts electricity from thin films of cadmium telluride (a semiconductor made from cadmium and tellurium) on glass.

Although they are not as efficient as silicon cells, cadmium tellurium cells are comparatively cheap to make and are fairly robust. They operate in a wide temperature range and in a variety of light conditions, including dawn and dusk. In other words, cadmium telluride is the Honda Civic of solar-panel material.

The company isn't facing a material shortage, like silicon manufacturers, and it is producing product, unlike the vast majority of CIGS companies.

First Solar said this week that it has signed a deal to supply investment firm Babcock & Brown with solar modules in a deal that will bring it $1 billion in revenue between 2008 and 2009. Overall, First Solar has contracts to install more than 3 gigawatts of power through 2012.

To meet demand for the project, the company's board has approved a fourth manufacturing plant in Malaysia. Two are under construction, and the company announced a third manufacturing plant in April. Each plant will have four manufacturing lines. When up and running, each plant will be capable of turning out 120 megawatts worth of solar panels a year, or 480 megawatts in total.

That will more than double the company's existing capacity. Right now, the company has plants in Germany and the United States that cumulatively can crank out 210 megawatts worth of panels.

The Walton family of the Wal-Mart fame funded the company from the beginning and still owns a large chunk of the stock.