Auriga Maintains Buy on First Solar After Conversion Efficiency Reports Yesterday

Auriga has published a research report on First Solar

after the company announced yesterday that it has achieved a 14.4% conversion efficiency for its cadmium-telluride based solar PV modules. In the report, Auriga writes, "At $39.92 FLSR trades at ~11.3x our C2012 EPS estimate of $3.55, and ~9.9x our C2013 EPS estimate of $4.05. To value solar PV stocks, we discount our three-year forward earnings, adjust for net cash, and assign a high single-digit to low-teen earnings multiple consistent with high growth companies with continued cash requirements and lack of pricing power. For trough valuation we use tangible book value as the reference metric. To reflect First Solar's long-term business model/operational excellence offset by near term loss of visibility/control amidst irrational pricing, on-going move to sustainable markets, management flux, and heightened political/economic concerns, we assign a 25% discount to the earnings multiple for now to set a $41 PT, which equates to 1x TBV. We see potential upside to our valuation target but will revisit it in the coming weeks." Auriga maintains its Buy rating and $41 price target on First Solar, which is currently trading up $0.81 from Friday's $39.92 closing price.