Monday, September 14, 2009

First Solar: Downgraded to Sell at Soleil; target lowered to $96 (FSLR)

As we said in Friday's "Kaufman Brothers: "First Solar Growth Story Over" (FSLR)":
"Despite Tuesday's pop (up almost $13.00) on the big China announcement the stock is looking sickly. It traded as high as $144.82 on Wednesday. Last I saw was $136.71 down $3.44."
In early pre-market trade the stock is down another $4.45 at $132.30.
From Notable Calls:
Soleil's Princeton Tech Research is out downgrading First Solar (NASDAQ:FSLR) to Sell from Hold while lowering their target to $96 (prev. $170).

Even the best thin film manufacturer in the world is not immune to the effects of overcapacity and the downward spiral that is occurring in solar module pricing. While the firm believes FSLR will remain the low cost producer of a solar module over the next several years, the company is facing a much more difficult margin environment going forward and it is now done with the high-growth portion of its capacity ramp. With module pricing likely to remain under intense pressure through 2010, and little new capacity likely to come on-line through the end of 2010, they believe the risks to First Solar's earnings are to the downside over the next four to six quarters. They are reducing their price target to $96 - 17X Soleil's $5.65 per share estimate for 2010.

One Era Has Ended At First Solar; A Newer, More Difficult One is Beginning - The last three years has been characterized by: 1) Large subsidy programs (relative to the industry's production capability); 2) Steady to HIGHER module prices; and 3) Massive increases in FSLR manufacturing capacity (from three 25 MW lines to twenty-three 55 MW lines in a little over three years). Earnings increased explosively in this "best of all world's" environment. Over the next three years, we are going to see almost the polar opposite: 1) Small subsidy programs (relative to the industry's production capability); 2) declining pricing and margins; and 3) Relatively modest growth in FSLR's manufacturing output. With unit margins on each module declining and little capacity growth, Soleil believes the risk to First Solar's earnings are to the downside - the era of continual upside earnings surprises is likely over....MUCH MORE
Notablecalls: First of all, I'm sorry if I put out too many details. But this call from Priceton Tech Research's Paul Leming is just so good. Excellent job! If you actively invest/trade in the space I suggest you contact these guys.

Contact : PTLeming (a/t)

I think this call has the potential to hurt FSLR today to the tune of 5 pts (or more). The stock has bounced 15-20 pts from its current lows and it kind of looks like downside is coming.

The Street low target is currently $86 from Kaufman but they have messed up their timing badly so I would consider Leming's $96 the true Street low at the moment.