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Goldman Upgrades First Solar To Buy; 'The Underappreciated Bellwether Takes Its Rightful Place'

January 5, 2016 8:31 am
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  • The share price of First Solar, Inc. (NASDAQ: FSLR) has appreciated 49.78 percent over the past year, rising to a high of $66.99 on December 30.
  • Brian Lee of Goldman Sachs has upgraded the rating on the company from Neutral to Buy, while raising the price target from $61 to $100.
  • Lee believes that the stock would outperform once again in 2016, with potential for 50 percent upside, driven by First Solar’s “best in class” balance sheet and volumes driven by CA RPS and the ITC.

Analyst Brian Lee expects the company to be “a key beneficiary of CA’s decision to raise its renewable mandate to 50 percent, while the extension of the 30 percent federal ITC for solar in the US – where FSLR has significant leverage – does not appear to be appreciated in either estimates or the stock vs. peers.”

In combination with First Solar’s growing international pipeline, Lee expects significant upside to the consensus EPS expectations, along with scope for capacity expansion, which in turn would prove to be another EPS catalyst.

According to the Goldman Sachs report, its strong balance sheet positions the company “to navigate more selective financing markets and maintain a relatively low cost of capital – while at the same time providing financial flexibility to fund projects off its balance sheet or be opportunistic via M&A to add to pipeline/backlog.”

The EPS estimate for 2016 has been lowered two percent to $4.20, while the EPS estimate for 2017 has been raised 26 percent to $4.16, to reflect expectations of higher volumes and margins in 2017.

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