Investors Shouldn't Fear First Solar Decline (FSLR)

First Solar Inc. (FSLR) has seen its stock lose 50% of its value over the most recent 12-month period. A recent solar industry slump has been attributed to slower demand in China, resulting in an oversupply of panels that has driven prices down. Short-term volatility in the industry was again bolstered by the election of climate-change denier Donald Trump. (See also: Renewable Energy Suffers From Trump Win.)

Stock Falls as Short-Term Investors Panic

Fist Solar, at the head of the industry for companies that manufacture and market solar panels, has announced a massive company restructuring to stay competitive. Along with slashing an approximate 25% of its work force, First Solar plans to overhaul operations, accelerating the production of a more cost-competitive Series 6 model. The firm will phase out its current Series 4 model and scrap plans to develop an intermediate Series 5. This year, the firm estimates $500 million to $700 million in pre-tax cost impairments.

The Tempe, Ariz.-based solar leader has taken a hit along with the rest of the renewable energy sector in light of the election of President-elect Trump, who has promised to bolster the polluting coal industry. To knock in greater losses, the firm has announced short-term adjustments that reduce guidance. Since benefits will not be expected before 2019, shareholders will bear the burden of the restructuring plans. As prices for solar panels are expected to decline another 30%, large customers are holding off deals in hopes of securing bargain prices.

Despite the losses, analysts have agreed with First Solar's realignment of strategy and operations as a step to ensure its position at the head of the solar industry. Implementing a more cost-effective product sooner will work to facilitate necessary re-investment in the firm come 2018 and beyond. Long-term investors should be reassured by the company's balance sheet, which is expected to hold a net cash balance of $1.4 billion to $1.6 billion when the initial restructuring challenges have been finalized by the end of the 2017 fiscal year. Investors that wait out two to three years for First Solar's restructuring to come to fruition are positioned to benefit from a cost-competitive model.

Trump Faces Backlash

While the solar industry will continue to face challenges from a Trump Administration, renewable investors have been calmed by the strong international reaction, along with voices at home championing environmental protection as a priority. More than 300 businesses - including Starbucks, Gap, Nike and L'Oreal - signed a letter on Trump's proposed energy policy, stating, "we want the US economy to be energy efficient and powered by low-carbon energy ... Failure to build a low-carbon economy puts American prosperity at risk."

The pact announced at a press conference during the Conference of the Parties (COP 22) in Morocco, serves as one indication that the renewable energy sector is the energy industry of the future, regardless of short-term price pressures and the uncertainty of a new U.S. administration.