First Solar's Outlook Dims After Q3 Results

Janney downgraded First Solar, Inc. FSLR to Neutral from Buy on tepid outlook and lower module prices that sets tone for a difficult earnings for 2017 and 2018.

Driven by tax benefits, First Solar’s third quarter non-GAAP EPS of $1.22 was well above Janney’s $0.78 forecast and consensus of $0.75. However,mid-to-late stage booking opportunities have dwindled to 1.1GW DC.

“On the call, the company indicated some projects in that slice of the pie chart have fallen to the wayside, which concerns us given expectations for 2017 were already diminished from a bookings perspective,” analyst Michael Gaugler wrote in a note.

The company now expects 2016 non-GAAP EPS of $4.30 to $4.50, versus the previous guidance of $4.20 to $4.50.

Given 15 percent drop in price-per-watt for c-Sci modules in the last two months, First Solar is mulling to save costs on its upcoming Series 5 modules, or essentially skipping over Series 5 to Series 6, where the gross margin has stabilized at greater than 20 percent.

“Given where total booking opportunities stand that this point in 2016, the possibility certainly exists for the aforementioned opportunity set to expand in 2017, but the base (in our opinion) is so low, the potential for a diminished 1H18 has increased,” Gaugler continued.

The analyst also cut his fair value estimate to $48 from $68.

At time of writing, shares of First Solar fell 15 percent to $34.50.