JP Morgan On First Solar: Buy The Dip
In a report published Wednesday, JP Morgan analyst Paul Koster maintained an Overweight rating on First Solar, Inc (NASDAQ: FSLR), with a price target of $68.
First Solar is expected to report its 2Q pro forma EPS at $0.51 and revenue at $812 million. The market expectations vary due to the formation of the 8point3 Energy YieldCo, analyst Paul Koster pointed out.
The company is expected to reinstate its FY15 guidance which was suspended owing to the formation of the YieldCo. "With the YieldCo now formed, we expected guidance to be updated. We look for FY15 PF EPS of $1.74 on revenue of $3,191mm versus consensus of $2.11 on $3,397mm," Koster added.
Noting that First Solar had achieved a "record 18.2% full area conversion efficiency for its CdTe module, higher than the record efficiency of 17.7% for multi-crystalline modules," the JP Morgan report mentioned that this conversion efficiency could result in a significant competitive advantage.
"Further improvements, at scale, could be a game-changer for the industry if FSLR can provide module efficiencies at or better than that of standard C-Si modules, while maintaining its low-cost advantage," Koster wrote.
First Solar's shares have declined by 20 percent since mid-June, while there has not been any fundamental change in the company's growth prospects. The stock valuation does not reflect the earnings growth prospects and the value creation from the formation of the YieldCo, the report stated, while adding, "We would be buyers of the weakness."
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