Oppenheimer Encouraged on First Solar, Inc. (FSLR) Despite Frazzled Shareholders


Yesterday evening, First Solar, Inc. (NASDAQ:FSLR) posted fourth-quarter earnings that have since sent the stock on a 6% dip in their wake. Oppenheimer analyst Colin Rusch chimes in from the sidelines; encouraged on Series 6 strategy progress and potential, yet cautious on the overall risk factor that remains facing the solar panel maker. In reaction, the analyst reiterates a Perform rating on FSLR without listing a price target.

For the fourth quarter, FSLR posted $480 million in revenue, which though outclassed consensus of $404 million simultaneously marks a fall compared to the $942 million the solar panel maker generated just a year ago. Meanwhile, gross margin of 13.2% came up short of the Street’s expectations for 22.8%, which the analyst attributes to “[…] project timing and a 500 bps impact of a project impairment on the 30 MW Barilla, TX project.” GAAP EPS of ($6.92) also missed when considering consensus called for ($5.95).

With regards to outlook, FSLR confirmed guidance of non-GAAP EPS for 2017 from $0.0 to $0.50, compared to consensus of $0.41. Compared to prior expectations set for $2.5 to $2.6 billion, the solar panel maker has now guided $2.8 to $2.9 billion, which beat the Street’s projection of $2.53 billion. However, gross margin guidance fell from 12.5% to 14.5% down to 11% to 13%, and came up just shy of consensus of 13.2%. CFO guidance was cut from $550 to $650 million down to $250 to $350 million, significantly under the Street’s expectations of $516 million.

Considering new guidance and “uncertain product outlook,” Rusch maintains his first quarter revenue projection for 2017 at $562 million, yet increases GAAP loss per share from $0.05 to $0.49 on back of a rise in SG&A expenses. For 2017 revenue, the analyst boosts from $2.49 billion to $2.81 billion and cuts non-GAAP EPS from $0.06 to ($0.46).

Ultimately, “FSLR posted results in line with its announced restructuring and indicated it had adjusted its near-term pricing strategy and begun to win a higher percentage of module bids. We continue to believe that FSLR shares are highly dependent on the success of its Series 6 technology ramp and cost structure. We are encouraged to see the company point toward potential for lower than $0.30/W in capex for Series 6. FSLR expects to begin booking Series 6 in late 2017 and accelerate bookings in 2018 and indicated it has 2.2GW of mid-late stage bookings opportunities, but continues to eat into backlog. We believe incremental detail on Series 6 will help investors, but we believe significant market and execution risk remain and maintain our Perform rating,” Rusch surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Colin Rusch is ranked #543 out of 4,490 analysts. Rusch has a 49% success rate and earns 9.7% in his yearly returns. However, when recommending FSLR, Rusch loses 31.2% in average profits on the stock.

TipRanks analytics indicate FSLR as a Hold. Based on 5 analysts polled by TipRanks in the last 3 months, 1 rates a Buy on FSLR stock, 3 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $36.58.