First Solar Options Soar Higher

First Solar, Inc. (FSLR) saw unusually high options activity last week despite a difficult market. Some 15,612 call options traded hands, which is more than double the average daily volume of 6,417 contracts, according to Shaeffer’s Research. The majority of the activity was centered around the October $240 strike. The premiums on these options jumped 3.14% to $19.10, which suggests a price of $259.10 during the next 40 days - a decidedly bullish sentiment for a stock at $236.

Last quarter, First Solar reported a 57 percent increase in quarterly profits, which soared past Wall Street estimates. There had been some concerns that expectations were too high for the firm, but higher-than-expected production from a new plant in Malaysia helped it meet continuing demand. The company reported net income of $69.7 million, or 85 cents per share, during the quarter. This pegs its earnings multiple at around 85x current earnings.

The big question in the solar industry is whether or not key U.S. solar subsidiaries that expire at the end of this year will be extended. New contracts with California utilities have many bullish on the stock with target prices ranging from $350 to $450 for the next 12 months. However, others are skeptical that utilities will continue to pile onto the solar bandwagon - a sentiment that has sent shares of First Solar’s competitors sharply lower. Regardless, it is a situation worth watching for investors.

First Solar designs and manufactures solar modules using a thin film semiconductor technology. Its solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. It has long-term solar module supply contracts with 12 European project developers and system integrators. Its customers develop, own and operate solar power plants or sell turnkey solar power plants to end-users that include land owners, commercial properties and public agencies.

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