PreMarket Prep Stock Of The Day: First Solar

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: First Solar

One nuance of earnings season often discussed on the PreMarket Prep Show is when a company is reporting relative to their peers in the industry. In other words, are the initial companies reporting setting the bar high or low expectations for the latter?

An excellent example of this phenomena took place in the volatile solar industry this week.

Setting The Bar Higher Than High

Earlier in the week, two of the top performers in the solar sector blew away their earnings estimates. On Tuesday after the close, Enphase Energy Energy ENPH announced an EPS beat of 6 cents along with a sales beat of $4.76 million. In Wednesday's session., the issue leaped from its close of $40.17 all the way to $57.22 and is maintaining that level.

After the close on Wednesday, SolarEdge Technologies SEDG, which benefited from the strong Enphase Energy report by adding $19.44 on Wednesday, blew the Street away with an EPS beat of 40 cents and a sales beat of $4.44 million. That report instigated a rally on Thursday from $127.42 to $142.20. The issue is surrendering some of those gains on Friday.

Amidst the strong reports from its peers, the Street assumed First Solar FSLR would do the same. As a result, the issue rallied from last Friday's close ($55.26) to an intra-day high of $59.90 in Thursday's session.

To Short Or Not To Short Ahead Of The Report

Taking a position in a company ahead of an earnings report can be very rewarding or very costly. On Friday's show, co-host Dennis Dick lamented not shorting the issue ahead of its report for the two reasons: the bar was set sky-high from the two prior reports in the sector and he seemed to recall that the company often misses on its report.

Perhaps if he had reviewed its past reports on the Benzinga Pro Earnings Calendar, he would have pulled the trigger. In some cases, pictures speak louder than words. In this instance, numbers speak louder than words. The company has not beat on EPS in six of its last seven quarters and has missed on sales in all of them.

Not only did the report come up well shy of expectations that were baked into the issue, but missed on EPS by 74 cents and fell short on sales by $39.1 million.

As a result, buyers from the last few days and others are attempting to exit the issue. As of 11:30 a.m. EST, the issue is trading lower by $8.60 at $50.72.