First Solar Guidance Looks Bad, But Investor Sentiment May Have Already Bottomed

First Solar, Inc. FSLR announced will slash around 27 percent of its global workforce and now expects its 2017 sales to fall well short of Wall Street's estimates.

The stock hit a 52-week low of $28.60, but recovered more than $3 per share as investors felt the initial selloff of more than 12 percent was unwarranted.

What To Like And Not Like

Vishal Shah of Deutsche Bank commented in a report that First Solar provided a 2017 outlook that fell short of the already low expectations and offered a cautious tone surrounding the entire industry's fundamentals.

The analyst did provide several positive takeaways from First Solar's announcement, including: 1) First Solar's Series 4 capex is expected to be 25 percent lower than the analyst's target, 2) The Series 6 payback time is two to three years even if the unfavorable pricing environment remains in place, 3) Series 6 production could see shipments of 1GW in 2018 and 3GW in 2019, and 4) First Solar will cut $300 million in opex in 2017 and this opex run-rate could continue even as the Series 6 module is ramped in 2018.

On the other hand, the analyst highlighted four aspects of the report he didn't like, including: 1) Concerning macro commentary in which is unclear if a pause in price stabilization is temporary or permanent, 2) the company's cash burn is expected to continue in 2018, 3) First Solar is paying $250 million in taxes to repatriate overseas cash, and 4) the bulk of the 2017 operating cash flow is from legacy projects and the core business is likely to not generate any cash in 2017.