Analyst Nearly Doubles His First Solar Earnings Forecast

• First Solar, Inc. FSLR has seen a 31.54 percent increase in its share price year-to-date, from a low of $39.83 on January 20.
• Argus' Michael Burke has maintained a Buy rating on the company, while raising the price target from $78 to $87.
• Burke expressed optimism regarding the company’s long-term earnings power, following the strong Q3 beat, with the revenue and EPS ahead the consensus and estimates.

Analyst Michael Burke believes that First Solar’s “technological investments are paying off, as they have enabled the company to lower the cost of solar generation on a per-watt basis and to expand its opportunity set of utility-scale projects.”

The company reported a 43 percent year-on-year and 42 percent sequential increase in its revenue for the quarter, while the EPS increased from $0.87 in 3Q14 to $3.38 in 3Q15. However, Burke cautioned that there could be fluctuations in the financial results from quarter-to-quarter, “due to the timing of revenue recognition for large-scale projects.”

Burke believes that First Solar is the best positioned in the solar industry, given that it has remained profitable even while its peers have been impacted by oversupply and lack of pricing power.

The company is “investing in its cadmium telluride technology, which should provide a cost advantage relative to more commoditized technologies like polysilicon,” the Argus report said.

In addition, First Solar has a robust balance sheet, while being cash flow positive. The company is also expected to benefit from “stricter environmental regulations on fossil-fuel-based power, and increased government and public support for clean energy,” Burke added.

The EPS estimate for 2015 has been raised from $2.58 to $4.48, following the strong Q3 beat. The 2016 EPS estimate has been raised to reflect expectations that customers would take advantage of the 30 percent tax credit, which is expected to decline to 10 percent in 2017.