Roth Lowers First Solar's Target To $70, But Likes The Stock Long Term

First Solar, Inc. FSLR reported mixed 1Q results, with the EPS ahead of expectations and revenue significantly missing the consensus forecasts.

ROTH Capital’s Philip Shen maintained a Buy rating on the company, while lowering the price target from $80 to $70.

Applauding the choice of Mark Widmar as First Solar’s new CEO during a period of transition, Shen expressed optimism regarding the company’s long-term competition positioning and technology, despite expectations of the stock seeing near term weakness.

Mixed 1Q

First Solar’s 1Q revenue was meaningfully lower than the consensus, “suggesting either (1) Stateline revenue was much lower with higher margins, or (2) the core Q1 revenue was much weaker than the Street had anticipated,” Shen said.

However, the 2016 revenue guidance was not raised, despite the Stateline contribution. The company also did not provide further details that could have improved visibility into 2017/2018.

Transition Phase

Management emphasized that the company was transitioning from legacy projects to more recent projects, which entailed lower margins and PPAs.

“Management is in the process of rolling out the new Series 5 and 6 products over the coming years, while assessing the appropriate time to pursue capacity expansion, thereby resulting in uncertainty of 2017 and 2018 earnings power,” Shen explained.