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Wall Street Seen as Too Optimistic on First Solar (FSLR), RBC Capital Downgrades to Underperform

May 26, 2015 6:59 AM EDT
Get Alerts FSLR Hot Sheet
Price: $149.48 --0%

Rating Summary:
    29 Buy, 18 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 9 | Down: 9 | New: 41
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(Updated - May 26, 2015 9:19 AM EDT)

RBC Capital downgraded First Solar (NASDAQ: FSLR) from Sector Perform to Underperform with a price target of $34 (from $54). Analyst Mahesh Sanganeria thinks consensus and guidance overestimates earnings power. Sanganeria also thinks its cost advantage over C-Si module producers is diminishing.

"We are rolling out 2016 revenue/ EPS estimates at $3.4B/$1.37 compared to Consensus $4.1B/$3.48 and company guidance of $3.8-4.5B/$3.5-5.0 provided in the 2014 Analyst Day. Our estimates have assumed revenue generation from asset sales to 8point3 Energy Partners, but do not include the associated gross margin penalty. While we are modeling gross margin in line with company expectations provided at the 2014 Analyst Day, we model flattish revenue growth in 2015 and 2016, compared to the company's previous guidance of 19% growth in 2015 and 2.5% growth in 2016, based on analysis of the company’s backlog and project list," said the analyst.

Sanganeria added, "In the past, First Solar was able to win large utility-scale project contracts with lower efficiency Cadmium Telluride (CdTe) due to its lower cost. Driven by significant decline in polysilicon price and manufacturing efficiency improvement, we estimate that production cost of C-Si modules will be only 2 cents higher than First Solar by the end of 2015. Considering that lower efficiency may incur higher BoS cost, First Solar may lose its cost advantage for the whole system compared to competitors using multicrystalline silicon technology."

For an analyst ratings summary and ratings history on First Solar click here. For more ratings news on First Solar click here.

Shares of First Solar closed at $55.07 yesterday.



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