Analyst Starts First Solar (FSLR) at Sell with $90 Price Target

Hapoalim Securities initiates coverage on First Solar (Nasdaq: FSLR) with a Sell rating and $90 price target.

The firm calls First Solar "a high-quality solar name, with far less implied risk than its crystalline PV peers..." but believes that a much "better entry point will emerge once the dust (ie, estimate revisions) has settled." Hapoalim points out such positives as a "first-mover advantage" in the low-cost thin-film space and a 4GW backlog with orders through 2012, valued at $6.3 billion, but feels that headwinds moving forward will outweigh these strengths.

Hapoalim cites negatives at First Solar including:

• adverse foreign exchange shifts as the Euro moves in-line with the dollar
  
• forward contract risk, specifically in Germany
  
• an average selling price reset in Q109
  
• start-up costs related to a capacity ramp in Malaysia during FY09
  
• less disclosure recently; the report specifically mentions an unexpected analyst day delay
  
• headwinds in the broader solar market, "including module oversupply and a much higher risk premium for project financing, meaning higher costs in '09..."

Hapoalim sees First Solar reporting Q4 sales of $408.5 million and EPS of $1.28, which compares to the Street's estimates of $429.35 million in sales and $1.29 in earnings. For CY09, the firm estimates sales of $1.9 billion, versus the Street estimate of $2.1 billion, and EPS of $6.97, versus the consensus of $6.83.

Notably, Hapoalim calls yesterday's 24% rise in shares of First Solar mostly due to a "short squeeze, rather than 'real' investor interest." With the stock trading around $140.78 today, the firm's price target represents potential price depreciation of about 36% from current levels.

First Solar, Inc. designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology.

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