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First Solar, Inc. (FSLR) Primed for Success, Cheers Roth Capital

Philip Shen digests FSLR's show-stopping Q3 earnings, chiming in on 201 trade ruling.


First Solar, Inc. (NASDAQ:FSLR) shares are rising 4% today after an already 20% jump on Friday on back of a robust third quarter performance. It looks like the company is presently benefiting from some recent legal contention, where a ruling from the U.S. International Trade Commission glosses FSLR products with a shiny upper hand edge over the international playing field.

Roth Capital Philip Shen chimes in with a positive take on the leading solar panel manufacturer in the United States, asking investors to dismiss the suggested negative fourth quarter EPS outlook, considering the team handed over 4.5 gigawatts in third quarter bookings. Based on the excited buzz circling the solar panel maker’s shares, it seems the Street is leaning towards Shen’s conviction.

Notably, the company just threw its hat in the ring behind section 201 trade case remedy petitioners Suniva and SolarWorld, where the U.S. International Trade Commission has deemed that in this injury finding, the verdict hits against Solar Energy Industries Association (SEIA). The ruling determines that the domestic solar manufacturing industry, with attention to crystalline solar panels are hurt by imported product-induced competition.

Even though FSLR is a member of the SEIA, the company stands to benefit, considering that though the trade case centers on crystalline silicon solar cells as well as modules, thin-film products are not in the mix- the very products FSLR spins out to the masses; the largest thin film photovoltaic (PV) module maker in the globe. The remedy petitioners sought out a massive tariff lift to levy the score between domestic and international competition, which is precisely where FSLR stands to win, as suddenly the company at the top of the solar panel leaderboard in the U.S. will have products at far more attractive costs than its foreign rivals.

Especially with FSLR’s new Series 6 panels forthcoming, Shen believes now the “201 bridge to S6 is in place,” elaborating: “The 201 has created an ‘accelerated procurement dynamic’ that has allowed the company to lock in 7.4GW out of 10GW of production over the next three years. We had previewed that the 201 likely created a healthy bridge over a potentially challenging 2018 to the S6 here; what FSLR delivered exceeded our expectations.” One note is clear regarding the impact of the 201 advantage: “The 201 is already doing its job for FSLR, and the company has effectively locked down ~75% of its production through 2020.”

In a bullish overview of the energy player’s quarterly outclass, Shen asserts: “Our checks heading into the earnings call […] suggest there were prohibitive cancellation fees, thus we believe the 7.4GW should be firm. Notably, management mentioned on the call that the company does not see ‘significant risk of renegotiation.’ To win these contracts, FSLR, in our view, likely did not gouge its customers, as speculated, but rather priced its modules at much more reasonable levels. Our read of the situation is that in exchange for modest ASPs that gave its customers certainty to build 2018, 2019, and 2020 projects, the company also gained certainty of its revenue, i.e. onerous cancellation terms.”

In reaction, the analyst dials back his 2018 expectations from a prior estimate more bullish than the Street at $3.17 to one “more modest” at $1.27, against past consensus of $1.28, while decreasing a “Street-high” forecast of $3.89 down to $2.87 for 2019.”

The analyst reiterates a Buy rating on FSLR stock with a price target of $60, which aligns with current levels. (To watch Shen’s track record, click here)

Most of Wall Street stands by this energy stock, considering TipRanks analytics exhibit FSLR as a Buy. Out of 9 analysts polled by TipRanks in the last 3 months, 6 are bullish on First Solar stock while 3 remain sidelined. The stock’s consensus target price stands at $59.00.