Monday, September 14, 2009

First Solar downgraded at Soleil, price target nearly halved (FSLR)

AlphaNinja - An analyst at Soleil Group downgraded shares of First Solar (FSLR) today, on concerns that future results will not top expectations to the degree they have in the past.

I'd hate to be a client of Soleil who bought shares Friday when the firm's target was $170, only to see them drop the target to below $100 today.

-->> 2010 earnings per share estimate is taken down to $5.65 from $8.25

39 analysts cover the stock of First Solar, and EPS estimates for 2010 range from a low of $3.07 to a high of $10.15 - you'd be hard pressed to find another stock so widely covered with such a disparity in earnings expectations. At $7.00 in earnings per share for 2010, Free Cash Flow would be about $450million, a scant 4.5% Free Cash Flow Yield (FCFY) that is only acceptable if the company is in high-growth mode. That may or may not be the case, as Soleil articulates

“Even the best thin-film manufacturers in the world is not immune to the effects of over-capacity and the downward spiral that is occurring in solar module pricing,” Leming writes in a research note. “While we believe 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.”

“There is widespread recognition that the polysilicon industry is moving into a period of overcapacity,” he adds.“What appears to be less widely recognized is that all of the solar value chain - wafers, cells and modules -a re going to be wrestling with too much capacity for the next several years.”

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