Is First Solar headed higher, or lower? Judging from the volatility of the stock, there is no clear consensus among investors. Even the analysts who spend their days scrutinizing solar companies can’t agree.
Yesterday, Craig Rubens wrote about the 8 percent rise in First Solar’s stock following healthy earnings growth and its sunny forecast of $1 billion-plus revenue this year. It took only one day for First Solar’s stock to not only give up those gains, but to fall to $263.35, which is 7.5 percent below its price before it announced its earnings.
Why? Two research analysts came out with critical reports on First Solar. Which is odd, because two other analysts raised their price targets on the stock the same day. Wedbush Morgan nudged its target from $250 to $260, and Piper Jaffray hoisted its from $280 to a stratospheric $340.
But investors took much more seriously the negative tones sounded in reports from Oppenheimer and ThinkPanmure, both of which downgraded their ratings on the stock.
Oppenheimer’s Sam Dubinsky, who cut his rating on FSLR to perform from outperform, argued that the stock should be high, but not this high given lingering uncertainties.
We recognize that First Solar deserves to trade at a premium valuation, though we see little upside to shares at current levels. We may turn more positive on shares once First Solar Electric gains scale; we also prefer to wait for margins to stabilize once capacity fully ramps. We are removing our price target.
For his part, ThinkPanmure’s Jonathan Hoopes cut his rating to accumulate from buy because of stiffer competition in the solar industry, especially among new technologies. Hoopes also mentioned production capacity growing faster than long-term orders, which could pressure down its prices later on.
Along with his ratings downgrade, Hoopes raised his price target to $340 from $310. Normally, that wouldn’t make sense, but with First Solar there’s a perverse logic to it: Uncertainty breeds volatility, and FSLR is likely to be moving all over the place for some time until it’s prospects are clearer to everyone.