The U.S. Department of Energy (DOE) recently announced conditional loan guarantees totaling $4.49 billion for three utility-scale photovoltaic power plants in Southern California. These three facilities will be using “thin-film” solar panels, which contain cadmium telluride (Cd-Te) instead of the more traditional silicon. First Solar, the undisputed leader in Cd-Te photovoltaic cell production, has been chosen as the supplier for these projects.

Together, these three projects will supply 1.33 gigawatts of clean electricity. This is a significant amount of energy – when complete these three projects will supply enough current to power over a quarter of a million homes. And the DOE estimates that 1.81 million metric tons of carbon will be saved from entering the atmosphere.

First Solar’s stock price bounced substantially on the news, jumping 2.8% in two trading days (see chart above). Before this announcement was released, I told my subscribers on June 1^st that I believed First Solar was undervalued, and set a target price between 110 and 115. That is exactly where the stock was trading the second week in June. First Solar was entered into the Roen Financial Report’s Paradigm Portfolio a year ago, on June 1^st 2010 at a price of 112.22.

Going forward, I think there is plenty of room for this stock to run. Looking at a combination of past and projected earnings, I still believe First Solar is below fair value. Unless earnings projections are adjusted, I calculate that First Solar will be below fair value until it reaches the 140 price range.

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