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First Solar Stock Is a Winner, But How Much Higher Can It Go?
Stock Analysis & Ideas

First Solar Stock Is a Winner, But How Much Higher Can It Go?

The markets fell sharply on Wednesday, but it was of little consequence to investors of First Solar (FSLR). Shares took off after the solar-panel maker delivered a massive Q3 beat. Overall, FSLR shares are up 56% year-to-date.

Q3 revenue increased year-over-year by 69.7% and by 44% from the previous quarter to hit $928 million, beating the estimates by $235.44 million. The company trounced the analysts’ bottom line forecast by reporting EPS of $1.45 vs. the Street’s $0.83.

At 31.6%, gross margin was up 600 bp year-over-year and by a hefty 1,000 bp quarter-over-quarter, boosted by the fact productive capacity ran above 100% at all the company’s factories.

As a result of the booming business, the company also resumed full-year guidance, withdrawn earlier this year due to the uncertain COVID-19 macro conditions.

First Solar now expects full-year revenue between $2.6 and $2.9 billion which is in line with pre-Covid levels, while EPS is actually looking better. The company expects GAAP EPS in the range of $3.65 to $4.15, compared to the previous $3.25 to $3.75 estimate.

Raymond James analyst Pavel Molchanov calls First Solar “large-scale, cost-competitive, and highly bankable.”

Following the results, Molchanov reiterated an Outperform (i.e. Buy) rating on FSLR shares and boosted the price target from $80 to $90. However, after this year’s share rally, his target implies a modest upside. (To watch Molchanov’s track record, click here)

The analyst said, “First Solar is the only U.S.-based module supplier in the global top ten, and it is also the only one without direct Chinese exposure. The absence of concrete cost metrics makes it impossible to say with precision how First Solar’s module costs compare with Chinese players, but our sense is that the company is in the industry’s top quartile on gross margin. Vis-a-vis bankability, First Solar’s cash-rich balance sheet amply compensates for its lack of a “big brother,” providing the financial flexibility to potentially initiate a share buyback for the first time ever.”

Where does the rest of the Street side on this solar player? It appears mostly bullish, as TipRanks analytics demonstrate FSLR as a Moderate Buy. Out of 13 analysts tracked in the last 3 months, 7 suggest Buy, 5 say Hold, and only 1 recommends Sell. With a return potential of ~7%, the stock’s consensus target price stands at $93.33. (See First Solar stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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