North Coast Solar Stocks

August 17, 2009

First Solar stock tumbles following negative Barron’s article

Filed under: FSLR — Tags: , , , , , — Jason @ 12:05 pm

Monday August 17, 2009, 12:05 pm EDT

NEW YORK (AP) — Shares of First Solar Inc. (FSLR) declined on Monday, following a Barron’s article that cast doubt on the solar panel maker’s free cash flow, better-than-expected second-quarter profit and accounting of its OptiSolar acquisition.

First Solar’s stock fell $6.70, or 4.7 percent, to $135.08 in midday trading.

On Monday Barron’s published an article that said the company’s price rebates for customers will continue to wear on its already deteriorating free cash flow.

Despite exceeding street profit expectations in the second quarter, the article called the “beat” a “figment of bookkeeping,” citing First Solar’s revenue recognition from modules sold to a solar farm southeast of Berlin. Originally First Solar expected to provide equity capital for the project. Then, after banks lent money to the project, the company decided not to make an equity investment, and recognized $84 million in revenue from module sales to the project.

Jefferies & Co. analyst Paul Clegg disputed the Barron’s article, saying that he knows of “no more appropriate accounting methodology than consolidation,” as First solar owns no equity interest in the project.

The Barron’s article also said the company’s accounting for its OptiSolar purchase deviates from what regulators require in similar cases.

Clegg countered the article again, saying, “either way, we believe the impact from a cash standpoint is still nil.”

Clegg said First Solar is “the best positioned solar name due to its low cost structure,” and rates the stock “Buy” with a price target of $200.

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