First Solar Shares Tumble Following Deutsche Bank Downgrade

Shares of First Solar, Inc.

fell 3.66 percent in the Thursday's pre-market hours after Deutsche Bank downgraded the stock to Hold from Buy and cut EPS estimates for 2017 and 2018. Analyst Vishal Shah attributed the downgrade to the following factors: 1) "slower than expected ramp in bookings"; 2) "likely pause in demand ahead of the series 5 ramp" and 3) "potential increase in pricing pressure, driven by aggressive bidding environment from the developers in international segments." As such, Shah now estimate 2017 EPS of $1.50 versus consensus of $3.18 and 2018 EPS of about $2.50 versus consensus of $3.98. "Even though FSLR remains one of the best run companies in our coverage, we believe it would be difficult for management to grow earnings amidst some of the expected near term headwinds," Shah wrote in a note. The analyst expects First Solar to face more pricing pressures due to: 1) "low PPA bids by developers in international markets would drive system/module prices down"; 2) "increased capacity expansion outside of China would enable Chinese module suppliers to avoid duties and pass on the cost savings to customers"; 3) "ramp of higher efficiency modules at low cost points would make FSLR's technology less competitive." Shah said checks indicate that the companies can on average save about 15c/W by building product outside the US and importing into the US market. As such, he now projects module ASPs in the US market around 54-55c/W compared to about 63c/W about 6 months back. "With greater capacity of higher efficiency panels now flooding the market, we see FSLR's series 4 modules (which have a power rating of ~120W) to be less competitive until series 5 panels (with 360W power rating) are available in 2H17 timeframe," Shah noted. Shah also slashed the price target on the stock by 45 percent to $44 from $80. Shares of First Solar closed Wednesday's regular trading at $49.13.