FirstSolar (FSLR – Last trade $80.82) is arguably the brightest solar stock of 2007. The stock has skyrocketed from a January 3 low of $28.20 to a June 19 high of $79.88. Banc of America, Lazard Capital, Piper Jaffray, Cowen & Co and First Albany all have buy ratings on the stock. Jim Cramer, who recently said that solar valuations have become uncomfortably high, said that he won't endorse shorting FSLR. As we pointed out last week, FSLR has recently showed the highest volatility of U.S. listed solar stocks.

Is the end in sight for FSLR's upward march? Banc of America seems to think FSLR will continue to defy gravity. The bank raised its price target on the stock to $91 from its prior target of $78, citing a lower-than-projected long-term tax rate for the company. Banc of America is also enthusiastic about FSLR's Malaysian PV production facility that will account for roughly 20% of FY08 production. The bank feels that production at the facility may start sooner than expected, adding upside to the FY08 EPS.

I continue to believe that FSLR will have greater pricing power in the long term due to its lower cost per watt. Recent data showed that FSLR modules were the lowest-cost in commercial production during 4Q06 at $1.25/W to manufacture (approximately 50% below the industry average). Margin pressure, resulting from reduced barriers to entry into the solar market, is expected to lead to many casualties. If we had to see margins compress, FSLR would be best positioned to weather the storm due to its pricing power. In addition, the company is immune to the polysilicon shortage, as their manufacturing process doesn't need the material.

Investors have become increasingly excited about solar stocks over the last year, but they remain cautious because many solar stocks lack sales visibility. To the contrary, FSLR has excellent sales visibility after signing contracts for 75% of their planned production until 2012. I feel that this is the primary reason why FSLR has outperformed many solar stocks this past year.

I believe in the cliche that the trend is your friend, and FSLR looks like a great buy. But don't pull the trigger just yet, because a pullback in the stock is long overdue. On June 4 the stock moved lower on chatter that the company could file a secondary offering shortly, and this seems very likely given the elevated stock price. Given the current uncertainty over U.S. rates, I also expect some investors to book profits on FSLR. Wait for the pullback, and then jump on board.

Disclaimer: I wish I was first to buy FirstSolar but alas, I do not own the stock. I also don't own a solar panel.