North Coast Solar Stocks

October 29, 2009

First Solar Crushed; Merrill, Caris, Gabelli Downgrade

Filed under: FSLR — Tags: , , , , , — Jason @ 3:20 pm

By Eric Savitz

First Solar (FSLR) shares are getting absolutely crushed today, after a disappointing Q3 earnings report and weaker Q4 guidance. The combination triggered some extremely bearish Street commentary, and spurred at least three analysts to issue downgrades.

* Bank of America/Merrill Lynch analyst Steven Mliunovich cut his rating on the stock to Neutral from Buy, with a new price target of $135, down from $180. He chopped his 2010 EPS estimate to $7.22, from $6.25. “It’s difficult to see upside catalysts given concerns regarding pricing and the German feed-in tariff along with the company’s limited ability to increase production if demand surprises on the upside.,” he writes. “We see four quarters of year-over-year earnings declines, not typically good for stock performance.”

* Caris & Co. analyst Ben Pang cut his rating to Above Average from Buy, and reduced his target to $162 from $205. He says that “earnings leverage is trending below our expectations…as pricing erosion and potential tariff changes will continue to pressure margins.” He says FSLR is likely go gain share, but that multiple expansion is unlikely unless the company can deliver higher efficiencies or better margins.

* Gabelli & Co. analyst Hendi Susanto downgraded the stock to Hold from Buy, noting that the pricing outlook is uncertain given a potential FIT reduction in Germany and competition with silicon-based providers. Susanto says the reduced rating reflects “narrowing margin and concern about impact of FIT reduction and further pricing competition with crystalline silicon modules.”

Meanwhile, Pacific Crest analyst Mack Bachman writes that press reports that the revenue miss reflects a revenue recognition push-out from a single project are wrong. “The revenue miss was due to a lack of module sales despite management giving away more than $60 million in price concessions in Q3,” he writes. “We are concerned that the rebate did not create demand.” His advice: “Put money to work elsewhere.”

FSLR today is down $22.96, or 15.2%, to $128.62

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