First Solar (FSLR: $44, down 11% today) saw shares plummet after reporting earnings and guidance. The company earnings 87 cents per share, much higher than the estimate of $0.54. Second-quarter sales were up 4% to $935 million. But, the company lowered its EPS outlook for the year, and 2017 remains problematic.
Revenue was noticeably higher than the $860 million that Wall Street analysts predicted. During the second quarter, analysts anticipated that the company would earn 58 cents. They took an $86 million restructuring charge due to its decision to stop making solar panels using TetraSun’s experimental technology. The net result was income of just 13 cents. Not good.
The company retained its 2016 outlook for sales of $3.8-$4 billion, but cut its EPS guidance to $3.70-$3.90 from an average of $4.30. They raised their estimate for operating expenses to $500 million from $390 million.
Janney Montgomery Scott maintained its Buy rating but lowered its target to $68 from $89.
Credit Suisse cut its target to $50 from $65. Merrill Lynch? $61 target. JP Morgan - $65.
Oppenheimer is still bullish and kept their Outperform rating and a $56 price target. So Wall Street is sticking with the company.
First Solar’s management team has some doubts regarding how strong a year 2017 is expected to be. It’s been anticipated that it will be a good year for new projects but there has been some concern regarding project demand. The projects that First Solar has invested in seem likely to be successful, but it could take at least two years for the market to see any results. Many investors today aren’t thinking that far ahead. This is why the stock was hammered today.
BMR Take: First Solar is going through some restructuring changes, and we have a choice. Stay with the company as it works through these things or punt. The stock hit our Sell Price of $44, but First Solar is the largest market cap solar company in the US and with earnings of $3.80 this year (if they perform) the stock is trading at just 12 times earnings. We admit that this is one of our worst performers, but we believe they will win in the end. We’ll probably see $40 or slightly below in the near future, so if you’ve had it with the company, then it is time to get out. We are going to stay with the company and look for a brighter second half and 2017. We are lowering our Sell Price to $38 and our Target to $65.