According to Renewable Energy World, researchers at the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) announced that they have moved closer to creating a thin-film solar cell that can compete with the efficiency of the more common silicon-based solar cell. The Copper Indium Gallium Diselenide (CIGS) thin-film solar cell recently reached 19.9% efficiency in testing at the lab, setting a new world record, according to NREL.

The CIGS technology, used by privately held Nanosolar, differs from the Cadmium Telluride in use by First Solar (FSLR). Amorphous silicon and cadmium telluride currently account for 95% of the thin-film panels made, according tot the Department of Energy.

While it is likely that the various technologies will leapfrog each other over time, the latest study will doubtless help Nanosolar in its ongoing quest for capital.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned.

Rumor: Nanosolar worth $2 billion, Solyndra $1 billion | Green Tech blog - CNET News.com

According to sources, Nanosolar is telling investors it will have a valuation, after another round of funds, of around $2 billion. Solyndra says it is worth $1 billion. Not bad for companies with combined current revenues at the moment that probably would have difficulty rivaling the take of a reasonably located convenience store. Nanosolar just started shipping a few solar cells to customers at the end of 2007, and Solyndra is ramping up toward production.

$2 billion would be in line with the value First Solar (FSLR) was assigned at the time of its IPO. First Solar, however, was profitable and had $134 million in annual revenue at the time. Clearly investors are now more aware of the potential growth in solar companies.

I haven’t looked closely enough at these companies to hazzard a guess as to whether they are actually worth it.

Disclosure: At the time of publication, William Trent has no financial position in the companies mentioned.

This article was originally published at RealMoney on September 17, 2007 and was featured in the September 24, 2007 Festival of Stocks.

Few stocks boil the blood of both bull and bear as much as Apple (AAPL), and for good reason. The company, richly valued though it is, has come out with more cool products than the rest of the tech industry combined. That helps excite the bulls, and as for the bears, there’s a good chance many of them are jealous for having missed out on the stock’s run. They have sour grapes they hope will someday be pressed into wine. And before you fanboys of some other tech stock get all hot and bothered about my disrespect of your favorite company’s innovation record, allow me to summarily dismiss them.

• Research in Motion’s (RIMM) Blackberry? Great mobile enterprise email device. But that’s for work. Ewww!
• VMWare (VMW)? See above. Not to mention it’s hard to show off your virtual server.
• First Solar (FSLR)? Try this for a pickup line: “Hey, want to go back to my place and see how thin my solar film is?” Unh-uh.
• Google (GOOG - Annual Report)? Still great at search. Nice email product. So what? They’ve spent more than a billion and a half on research and development in the last 12 months, and I dare you to tell me where it went.

As you can probably tell, I haven’t gotten nearly enough hate mail recently, and I’m trying to kick things up a notch. So back to the task at hand: Apple. Let’s quickly take a look at what I think are the best arguments on each side.

First up is whether the “halo effect” from the iPod is helping bread and butter Mac sales. Mac units were up 33% year over year, compared with just 12% for PCs overall. Bears counter that most PC makers (with the exception of industry leader Dell (DELL) had unit growth similar to the growth in Macs. But this ignores the very important point that Mac units sell for much more on average than the typical PC - so in terms of revenue share is likely growing much faster. Edge: Bulls.

Next, is the iPhone a phlop? When 270,000 units were sold in the first two days, I said “the 730,000 they are guiding to for the next three months seem conservative laughably low.” It is now looking as though it was only conservative. It is pretty clear the price cut was driven in part by a significant slowdown in sales - to possibly as low as 5,000 units per day by the time of the price cut according to one convincing analysis. But that would still put the iPhone in the same league as Palm, even if not quite matching their original estimate of being in RIMM’s league next year. But don’t forget - they got where they are now being sold by one carrier in the U.S. As they roll out to other carriers on other continents, they could meet their target yet. It’s not living up to the hype, but it is still a success. Edge: Even.

Finally, the iPod - a product that nobody seems to care about anymore, yet which sold 10 million units last quarter when it hadn’t had a product refresh in ages.

From an accounting standpoint, things are going so well that they are now deferring revenue from their new products rather than booking it up front. This practice will help bake some growth into the cake. True, the company’s earnings were boosted by a penny due to a lower bad debt reserve, but when you are beating quarterly estimates by a quarter that is just chicken feed.

While the stock has nearly doubled over the last year, its free cash flow has more than tripled. As a result, a company that is growing at more than 20% per year on the top line is yielding 3.9% on a free cash flow to enterprise value basis.

About the most significant risk, in my mind, is the possibility of a consumer slowdown combined with increasingly high expectations. Apple is far more consumer-driven than other tech stocks, and a 40x P/E multiple might not hold up if they only beat by a nickel instead of the quarter investors have come to expect. That’s why I think the free cash flow is so important in this case - it provides a solid backstop, and would help justify being patient through a slowdown should it come. If the company can grow at even half the current rate over the next five years, investors are likely to be well compensated for the added risk.

Positions: Short Research in Motion (RIMM)

Jim Cramer’s favorite solar stock First Solar, Inc. (FSLR) announced its financial results for the second quarter ended June 30, 2007. Quarterly revenues were $77.2 million, up from $27.9 million in the second quarter of fiscal 2006 and slightly ahead of the $76 million consensus.

Net income for the second quarter of fiscal 2007 was $44.4 million, or $0.58 per share on a fully diluted basis, compared to net income of $5.0 million, or $0.07 per share on a fully diluted basis for the first quarter of fiscal 2007 and a net loss of $2.5 million for the second quarter of fiscal 2006 or $(0.03) per share on a fully diluted pro-forma basis. Net income for the second quarter of fiscal 2007 includes a one time income tax benefit of $39.2 million, or $0.51 per share on a fully diluted basis, resulting from the reversal of valuation allowances against previously established U.S. deferred income tax assets.

While the operating net income was just $0.07, it was still far better than the $0.03 consensus. Furthermore, while the tax benefit was theoretically a one-time event it was good news for two reasons. First and most obvious was the $39.2 million tax benefit. Second was the reason the company reported the benefit. Deferred tax assets arise when the company loses money and has negative taxes due. The company does not receive a refund but can offset future profits with the tax credits as long as it earns the income before the credits expire. Since that can be in doubt, companies must take a valuation allowance for the possibility that they will not earn sufficient future income to claim the credit. By reversing the allowance, the company is essentially raising their long-term earnings guidance.

But neither beating the earnings number nor raising their long-term guidance was enough to satisfy a newly risk-averse market, and shares traded off sharply after market hours. The current euphemism for this is that the market is “repricing risk.”

You see, there is no way to know for sure exactly how much First Solar is worth. Its current earnings are worth somewhere between $5.00 and $10.00 per share. The other $100 per share or so is what the market is willing to pay for growth. Since nobody really knows how much the company will grow, the “true value” of First Solar could be $20, $100 or even $1,000. Up until last week investors were willing to pay $110 in hopes that the true value was higher.  Now that the year/year growth is only triple instead of quintuple they think the odds of it being worth more than $100 require a little extra return to compensate for the volatility. To get a little extra return one has to start with a lower price.

And that is what the pundits mean when they tell you the market is “repricing risk.” Most people call it repricing stocks. Last week I was surprised that investors didn’t reprice by as much as I thought they might. Now it looks like it may simply have been a delayed reaction.

First Solar, Inc. (FSLR)  filed a registration statement with the Securities and Exchange Commission for a proposed offering of up to 9,650,000 shares of its common stock. The 9,650,000 shares to be registered include 5,650,000 shares owned by certain stockholders of the Company. The offering could increase the share count by as much as 13%, which would mean the stock is currently trading at more than 100x 2008 earnings.

With insiders selling most of the shares, the company will not be getting the funds raised and will thus will not be able to use it for growth investments. Coming on the heels of a negative Barron’s article, I am if anything surprised that the shares are not falling further on this news. In after hours trading they are down 4%, far less than the dilution that will occur after the offering.

Jim Cramer’s favorite solar play, First Solar, Inc. (FSLR) Announced 2007 First Quarter Financial Results:

Quarterly revenues were $66.9 million, up from $52.7 million in the fourth quarter of fiscal 2006 and up from $13.6 million in the first quarter of fiscal 2006.Net income for the first quarter of fiscal 2007 was $5.0 million or $0.07 per share on a fully diluted basis, compared to net income of $8.0 million or $0.11 per share on a fully diluted pro-forma basis for the fourth quarter of fiscal 2006 and a net loss of $5.9 million for the first quarter of fiscal 2006 or $(0.08) per share on a fully diluted pro-forma basis.

Nothing will get investors excited like quintupling revenues. Shares are up sharply in after hours trading. Analyst expectations of breakeven earnings on $53 million in revenues were probably sandbagging things a bit - we would expect solar installations to increase as Spring approaches relative to the fourth quarter.

Applied Materials (AMAT - Annual Report) has announced an aggressive push into solar power and MEMC Electronics (WFR) has seen significant benefits from the demand for silicon wafers for solar panels. Unfortunately for both companies, it is increasingly likely that silicon will not be the fundamental building block for the solar-powered future:
Plastic solar cell efficiency breaks record

Three percent was the highest efficiency ever achieved for plastic solar cells until 2005 when David Carroll, director of the Wake Forest nanotechnology center, and his research group announced they had come close to reaching 5 percent efficiency.Now, a little more than a year later, Carroll said his group has surpassed the 6 percent mark.

“Within only two years we have more than doubled the 3 percent mark,” Carroll said. “I fully expect to see higher numbers within the next two years, which may make plastic devices the photovoltaic of choice.”

Certainly there is room for both technologies in the near term. However, we believe many investors are hoping for an unlimited solar opportunity for some companies and that the actual opportunity could be far smaller than is generally believed.