Here are the 2 companies Wall Street’s solar stock pickers love most JKS and FSLR.
But which stock is the better choice right now?
JinkoSolar (JKS) and First Solar (NASDAQ:FSLR) are among the world’s biggest solar equipment manufacturers. With an explosion in demand and massive economies of scale, solar panel prices have plummeted far more than predicted and became the cheapest form of renewable energy on earth. On the other side solar shares skyrocketed.
With climate consciousness on the rise, and prospects of a Joe Biden victory, who is very vocally pro-climate action, solar stocks might become the next biggest multi-baggers.
JinkoSolar is undoubtedly the largest solar equipment manufacturer in the world. Jinko has an annual capacity of 11 GW of solar cells, 25 GW for solar module assembly, and 20 GW for silicon wafers. The company has 7 production facilities around the globe. The company sold 14.2 GW of solar equipment last year.
First Solar is the largest solar equipment manufacturer in the US. The company has a global manufacturing nameplate capacity of 6.7 GW. The company operates 3 manufacturing plants globally. The company sold 6.1 GW of equipment in 2019.
JinkoSolar operates an asset-light-manufacturing business model. The company outsources a significant portion of the most capital intensive component of the product portfolio, the PV cell production.
JKS makes up for the extra-cost with low leverage and debt expenses coupled with massive economies of scale on other components. The company has a massive advantage as it has domestic status in China which by far the highest in the world. According to projections, solar installations just in China are expected to cross 60GW over the next five years, which four times the companies current global sales.
First Solar is far more focused on commercial and utility-scale installments than consumer or B2B sales. The company offers all-in-one installation, maintenance, and project financing solution to large-scale clients and this segment makes up more than half of its 2019 revenue. It is also worth noting that this segment has bigger margins compared to just module sales.
FLSR also has a technological advantage as their Cadmium Telluride(Cd-Te) semiconductor film technology is the most efficient in the world with 22.1% cell efficiency and 18.2% module efficiency.
In Q2’20, JinkoSolar reported revenues at $1.2 billion on shipments of 4.4 GW, up 22% YoY. Shipment growth from Q2 2019 was 32%. Despite, the 32% growth in shipments, revenue was lower because of lower average selling prices this year. The company has a 17.9% gross margin. The company has a market cap of $2.53 billion and a P/E of 13.5.
First Solar reported its Q3’20 numbers and reported a 70% YoY growth in net sales. The company reported net revenues of $928 million, operating income of $207 million net income of $155 million. Net income is up nearly 5x from Q2 and Q3’19. The company has a market cap of $8.45 billion and a P/E of 38.
With an undoubtedly bright outlook for the solar sector shares, both stocks present great opportunities for investors, however, with JKS’s dominant position in the Chinese market and far-lower P/E valuation, it is definitely the higher upside choice of the two.