First Solar: Bull and Bear Mull Q2 Upside, German Rebates (FSLR)

A roundup of analyst commentary from Tech Trader Daily:

It was a strange quarter for solar panel maker First Solar (FSLR) last night. The company reiterated its forecast for 2009 revenue, which was probably expected, but it also beat Q2 revenue, leaving some disappointed with the lack of upside for the rest of the year. Moreover, the big issue on the call, the decision by the company to offer rebates in Germany is paradoxical given that it was $84 million in revenue from Germany, analysts say, that helped the company beat Q2 expectations. Do the rebates signal a continuing threat of price erosion and stalled customers as First Solar competitors cut their prices?

Here’s what the Street’s thinking today:

Mark Bachman, Pacific Crest: Reiterates “Outperform” rating on First Solar and $227 price target. Bachman raised his estimates for this year’s sales and profit to $2.05 billion and $8.21 from a prior $1.95 billion and $8.02. His model reflects higher production ramp-up at First Solar, but he’s also taking into account the threat of falling average selling prices and the company’s increase in R&D, which will offset higher production and lower operating profit. Bachman says a reiteration of 2009 forecast was expected, but that was before the company beat on the top line for Q2. Though Bachman believes he’ll be more “hard pressed” to defend the bull case for the stock, given that there was no warning to the Street about rebates, he does believe gross profit should hold up, despite rebates, at around 50%, rather than the 40% some bears are now calling for. Gross profit was 56.7% last quarter.

Ben Pang, Caris &; Co: Reiterating his “Buy” rating and his $205 price target, Pang writes that average selling price and gross profit concerns “are not going away anytime soon.” Pang lowered his 2009 revenue estimate to the mid-point of the company’s forecast, $1.94 billion, just like Bachman. “Although we do expect pricing pressure and industry uncertainty to continue,” writes Pang, “we still think First Solar’s cost reduction roadmap and strategic geographic positioning will allow them to capitalize on improving industry conditions.” Pang notes that higher-than-expected gross profit came from higher factory throughput last quarter. He thinks that going forward, margin improvement will come from “higher cell efficiency” in the company’s modules....MORE