Argus: First Solar Is The Best-Positioned Company In Solar

First Solar, Inc. FSLR reported a revenue decline for 1Q16, but raised the EPS guidance for 2016. Argus’ David Coleman maintained a Buy rating for the company, while slashing the price target from $90 to $66. The analyst expects First Solar’s results to be volatile on a q/q and y/y basis on account of the timing of revenue recognition for large-scale projects.

The company reported 1Q revenue of $848 million, down from $942 million in 1Q15. The sequential decline was a result of the timing of revenue recognition across several projects, offset partly by higher revenues from the Desert Stateline project.

Management raised the lower-end of the EPS guidance for 2016 from $4.00-$4.50 to $4.10-$4.50, while reiterating the sales projection of $3.8-$4.0 billion.

Best Positioned In Solar Space

Analyst David Coleman commented, “We view First Solar as the best-positioned company in the solar industry based on its profitability, cost-effective technology, and strong balance sheet and cash flow.” He mentioned that the company was able to remain profitable, even while its peers have been struggling with oversupplied markets and a lack of pricing power.

First Solar is investing in its cadmium telluride technology, which is likely to give the company a cost advantage over more commoditized technologies like polysilicon, Coleman noted. He added that despite the recent decline in cash, First Solar’s balance sheet remained robust, and the company is cash flow positive.

The yieldco partnership with SunPower Corporation SPWR would offer additional opportunities for First Solar to monetize projects. Coleman added, “FSLR should also benefit from stricter environmental regulations on fossil-fuel-based power, and increased government and public support for clean energy.”