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Analysts Concerned On First Solar's Regulatory Outlook, But Cheer Stock Performance

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Analysts Concerned On First Solar's Regulatory Outlook, But Cheer Stock Performance

Wall Street analysts were generally impressed with First Solar, Inc. (NASDAQ: FSLR)'s quarterly earnings report Tuesday, which saw the company dominate earnings estimates and solidly beat revenue consensus. The company provided fundamentals confidence by reporting efficiency increases.

Firms were roundly concerned over the potential impacts of changes in U.S. solar regulatory policy on First Solar's outlook, but were largely confident as they looked toward the company's April 5 Analyst Day.

The company did trim its fiscal year 2016 sales outlook from a range of $3.9-$4.1 billion to $3.8-$4 billion over a $3.83 billion consensus. It reiterated its 2016 earnings guidance, a range of $4.00 to $4.50.

Analysts Worry About Solar Regulation

Avondale senior analyst Michael Morosi noted that First Solar reported an "upside across all metrics," although his firm's price targets and estimates were still under review when his note was published. He gave the company a Perform rating.

Related Link: U.S. Solar Installations Top Natural Gas For First Time In History

Morosi explained the company's lower guidance as "capturing the impact of the solar investment tax credit extension," and that overall, "this was a solid print" for First Solar. He expects positive reaction leading up to Analyst Day, but tempered his analysis by noting that the company is "highly sensitive to policy changes that impact the U.S. market." He also emphasized the company's efficiency roadmap as an important benchmark.

Oppenheimer analyst Colin Rusch shared a similar sense of hedged optimism. Rusch offered an Outperform rating and $76 price target. He said First Solar's strong showing was "driven by impressive product and system cost management."

Rusch wrote, "We see FSLR regaining the mantle of solar's cost leader" but was cautious on the company's portfolio, worrying it might be "too heavily weighted to module sales." He cited regulatory changes in the U.S. market as the stock's greatest risk and potential expansion in India and the Middle East as future catalysts.

Deutsche Bank's Vishal Shah gave First Solar a Buy rating and $86 price target, saying the company was "firing on all cylinders."

He wrote, "FSLR continues to remain one of the cheapest high quality solar stocks in our coverage."

Shal was encouraged by the firm's international expansion, noting the majority of its bookings since its Q3 earnings call were international. He was worried about changes to government solar programs like his fellow analysts, but also noted competition from silicone solar panels could edge on First Solar's crystalline panel market.

Stifel analyst Sven Eenmaa offered a Buy rating and $90 price target, applauding the company on maintaining its 2016 EPS guidance even as the company pushed several projects back to 2017 to take advantage of a tax credit extension. Eenmaa also pointed to the firm's efficiency figures as a reason for confidence, noting that First Solar's average fleet efficiency rose 170 basis points year-over-year to 16.1 percent.

Stifel raised its 2016 revenue and EPS estimates from $3.48 billion and $3.92 to $3.89 billion and $4.27.

Efficiency Is Key Metric

Credit Suisse's Patrick Jobin was least confident in First Solar, offering a Neutral rating and $65 price target. His firm's estimates remained unchanged pending the company's 10-K filing.

Jobin also pointed to efficiency as a noteworthy aspect of FSLR's report, pointing out that the company broke an efficiency record for CdTe solar cells with 22.1 percent, beating the 22 percent target it set at its 2014 Analyst Day.

Jobin expects the company to offer a three-year outlook at this year's event, and that the company's primary risks are reduction of government solar incentives and ensuring it is able to cut costs.

First Solar shares were booming, up more than 11 percent at $69.09 Wednesday morning.

Latest Ratings for FSLR

DateFirmActionFromTo
Nov 2020Morgan StanleyDowngradesEqual-WeightUnderweight
Oct 2020JP MorganDowngradesOverweightNeutral
Oct 2020Raymond JamesMaintainsOutperform

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