Raymond James Sees Risks Ahead for First Solar (FSLR) Despite Near-Term Upside
Renewable Energy analyst at Raymond James, Pavel Molchanov, published an earnings recap note this morning looking beyond the near term upside to see risks ahead for First Solar (NASDAQ: FSLR)
Revenue of $1.3 billion rose by 43% y/y, and gross margin of 38.1% was at the highest level since 2011. EPS of $3.38 was more than double consensus of $1.53.
Revenue recognition on the sale of the Desert Stateline project is what enabled the company’s most profitable quarter ever. Outside of the US, the first two blocks of the Luz del Norte project went online this week, supplying 71 MW to the Chilean grid. When the other half of this project is completed in January 2016, this will be the largest solar power plant in Latin America.
Full-year EPS guidance is moving up – though, not as dramatically because some of the upside was due to timing.
First Solar is holding off giving 2016 guidance until its analyst day (1Q16).
Thematically, the main risk is the rising cloud over U.S. utility-scale deployments given the looming ITC cliff at year-end 2016. Near term there is also is a foreign tax dispute which could potentially cost the company about $0.40/share .
FSLR shares are trading at 14x the analyst’s 2016 EPS. While this multiple may seem low, it can also be considered a reasonable valuation for a business that still has minimal recurring revenue. No change to Market Perform rating. The company does not have a target price on FSLR.
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Shares of First Solar closed at $50.99 yesterday.