First Solar Turnaround Will Require 'Near Flawless' Execution

Credit Suisse cut its estimates and price target on First Solar, Inc. FSLR, which needs a “near flawless execution” to navigate market as well as technological challenges.

First Solar is facing margin pressures on module sales on a slump in module and PPA prices due to oversupply. This led to the cancelation of Series 5 module expansion plans and replacement of 3 GW of current Series 4 capacity with Series 6 over the next 18 months.

As such, the company plans to cut about 1,600 jobs, totaling 27 percent of the total global workforce. In addition, First Solar updated its 2016 earnings guidance and guided 2017 earnings well below Street view.

“While the company has delivered on recent cost reduction and efficiency improvements, the task ahead is daunting and will require near flawless execution,” Credit Suisse analyst Andrew Hughes wrote in a note.

Hughes cut his 2016 earnings view to $4.66 from $4.36. The analyst, who has a Neutral rating on the stock, slashed his target price to $30 from $50.

“More than ever, First Solar is a show-me story, and while there could very well be earnings power on the back-end, there is not much yet to point to say with confidence that it will happen,” Hughes added.

Shares of First Solar closed Wednesday at $32.82. In pre-market hours, the stock sank 12 percent to $28.80 and set to open on a new 52-week low.