Yesterday, both Kaufman Bros and FBR Capital issued negative reportson First Solar (FSLR), but the stock didn’t budge as it held above the$120 level. That kind of resilience typically sets up at least someshort term strength which is why I have initiated a swing trade aroundthe $123 level. My stop point is just below the $120 level.
Here are the analyst comments from yesterday… (hat tip to StreetInsider.com for the analyst comments)
FBR Capital cut its price target from $110 to $90 and lowered 2010 earnings estimates.
“Given our belief that FSLR’s 3Q report/conference call underscoredall of the major concerns we have been raising for more than a year, wespent a few days reexamining our assumptions and model. We have onceagain reached the conclusion that the stock, following the sharpsell-off post 3Q report, may have not seen a bottom yet simply becausewe do not believe the true earning power of the company has been fullydialed into the stock. Yes, despite our repetitive warnings, investorswere still surprised that the timing of the sale of the first phase ofthe Sarnia project caused the 3Q09 miss. Following 3Q report, we arechanging our CY09 EPS estimate from $7.34 to $7.35, though the entireupside is attributed to lower taxes. We are also fine-tuning our CY10estimate, which has been reduced from $5.00 to $4.75, versus thecurrent consensus estimate of $7.29. Our new CY10 estimates are basedon a module/system (revenue) mix of 80/20. For system biz, we areassuming 45 MW of the Ontario pipeline (PPAs), Tri State 30 MW (PPA),Sampra 48 MW (EPC), and LADWP 20 MW (EPC)…We are also using thisopportunity to introduce our CY11 EPS estimate of $4.43, versusconsensus of $9.04. Our CY11 estimates are based on module/system(revenue) mix of 65/35.”
Kaufman Bros maintains its Sell rating and price target of $86.
“We believe FSLR’s business model will come under continuous marginpressure, due to competition and the general commoditization of solarcells. With 50% gross profit margins, we believe the long-term outlookis for these to decline to the 10% range.”
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