2 First Solar Analysts Take Opposite Sides Of Trade Before Q3 Report

Heading into First Solar, Inc.'s FSLR third-quarter report on Tuesday, Wall Street analysts are switching their stances on the solar company.

The First Solar Analysts:

Roth Capital analyst Philip Shen upgraded First Solar from Neutral to Buy with a price target lifted from $65 to $100.

Credit Suisse analyst Michael Weinstein downgraded First Solar from Neutral to Underperform with a $64 price target.

Roth Sees Upside Catalysts: First Solar could be a winner from recent action taken by U.S. lawmakers and President Donald Trump, Shen wrote in a Sunday upgrade note.

First, the U.S. passed the Uyghur Forced Labor Prevention Act in late September that calls for a ban on imported goods from the Xinjiang province of China until it can prove forced labor was not used.

Related Link: Solar Could Become 'The New King': World Energy Outlook Report

The ban could impact "a large percentage" of solar modules used in the U.S., with the exception of First Solar, which does not count China as a source of manufacturing, the analyst said in an Oct. 21 note.

The company has manufacturing facilities in the U.S., Malaysia and Vietnam, so it stands to benefit from customers that want to work with a more reliable supplier, Shen said. 

Second, an early October Presidential Proclamation removed the Section 201 bifacial exclusion, but over the weekend, a judge blocked the withdrawal, the analyst said.

A judge did not rule to stop an increase of the tariff rate from 15% to 18% or stop the 201 extension process, and this represents a key upside catalyst for First Solar, according to Roth. 

Credit Suisse's Valuation Concerns: First Solar's stock is trading at around 15 times next year's EBITDA, and this is near prior peak multiples that were recorded before Section 201 tariffs were introduced, Weinstein said in a downgrade note. 

While a new set of tariffs are possible, First Solar's stock valuation implies a 14% Section 201 tariff exemption in perpetuity or 60% Section 201 tariff for the next four years, the analyst said. 

"Both scenarios seem highly unlikely to us given the limited history of Section 201 (ex-China) and the supply chain's demonstrated ability to relocate globally in response to anti-dumping and Section 301." 

FSLR Price Action: First Solar shares lost 1.9% in Monday's session, closing at $83.75. 

Posted In: Credit SuisseMichael WeinsteinPhilip ShenRoth CapitalSection 201SolarSolar StocksAnalyst ColorUpgradesDowngradesPrice TargetAnalyst Ratings

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