Baird Defends First Solar As 'Fresh Pick,' Finds Comfort In Revenue Visibility

First Solar, Inc. FSLR shares have made a steep, 22-percent slide since the start of the month as negative policy plays out in China.

Multiple analysts have jumped ship, but Baird Equity Research intends to ride it out. 

The Rating

Analyst Ben Kallo maintained an Outperform on First Solar with an $85 price target.

The Thesis

In spite of the foreseen decline in global solar demand, Baird ranked First Solar a “fresh pick” and tagged it “undervalued” relative to peers. (See the analyst's track record here.) 

“While some investors have begun to look to 2021 [and beyond], we note it is challenging to predict market dynamics over that time horizon, and believe Street estimates may be too low in the intermediate term,” Kallo said in a Monday note. 

Revenue visibility, with about 80-percent capacity contracted through 2020, is projected to fortify First Solar from near-term module pricing pressure driven by Chinese regulation, the analyst said. 

Kallo does not expect contract cancellations, which would result in forfeited down payments and potential penalties. Given that First Solar has less than 3 gigawatts of capacity left to sell through 2020, the analyst said he anticipates “minimal impact” from foreign policy.

Estimates for 2020 are too low to reflect First Solar's Series 6 margin advantage, according to Baird. 

Price Action

First Solar shares were down 1.75 percent at $51.75 at the time of publication Monday. 

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