Wednesday, April 28, 2010

"First Solar Preview: It's About the Outlook" (FSLR)

UPDATE III: "Cowen's Stone, Auriga's Bachman Comment on First Solar (FSLR)"
"First Solar to add 4 new production lines: sold out through 2010" (FSLR)
"First Solar Posts Surprise Profit Growth On Strong Demand" (FSLR)
Original post:
Following up on yesterday's "Auriga Sees First Solar Entry Point Coming" (FSLR)"'.
From The
First Solar(FSLR) bears took aim at the U.S. solar bellwether's latest acquisition on Wednesday morning, and the skepticism goes right to the heart of concerns from the Street headed into First Solar's earnings report, scheduled for after the market close on Wednesday. How does the large-scale solar project development business play out in the second half of 2010?

The expectations for First Solar's earnings report are consistent with the general notion that solar companies will have a strong first quarter, with shipment levels buoyed by the ridiculous levels of demand in Germany ahead of the feed-in tariff cuts in solar's largest market.

There are analysts, like Mark Bachman of Auriga Securities, who believe that consensus expectations for First Solar are setting up the U.S. solar company for an earnings headline miss after the market close on Wednesday.

Yet for the most part, analysts seem more concerned about the outlook for the second half of the year, when the insatiable appetite in Germany for solar modules wanes and First Solar has to focus on the still unproven, lower margin utility-scale solar business .

Case in point: even Wedbush Securities analyst Christine Hersey, who has been a bear on First Solar shares for some time already, is slightly ahead of the Street consensus estimate for first quarter earnings per share from First Solar.

The Street is expecting $1.61 to $1.65 per share earnings from First Solar.

The criticism from Wedbush's Hersey and other skeptical analysts about the First Solar outlook was triggered again on Wednesday morning when First Solar announced a $285 million purchaseof a southwestern U.S. project pipeline of 1.1 gigawatts.

The Street is concerned about the changing nature of the First Solar profile, as more of its business -- by its own previous guidance -- shifts to the lower margin, large-scale solar project market in the second half of the year. Even the analysts who remain convinced of the First Solar strategy remain unsure of how to model the shift to the lower margin systems business.

Steven O'Rourke, an analyst at Deutsche Bank Securities, said investors are focused on how the project development business plays out throughout 2010. "Investors want clarity and detail on when projects will land and how to layer the project development business into the financial model," the Deutsche Bank analyst said. "What will hit and when it will hit is the unknown," O'Rourke said....MORE