First Solar, Inc. (NASDAQ:FSLR) has retained a Neutral rating from Baird Equity Research analyst Ben Kallo prior to the second quarter earnings. Analysts at Baird expect revenue for the second quarter to come in at $802.8 million and Non-GAAP EPS of $0.70 compared to consensus of $728.7 million and $0.56, respectively.First Solar

 Non-GAAP EPS estimates for fiscal year 2013 and fiscal 2014 are expected to be $3.93/$3.25 compared to average of $4.13/$3.27.

Safe balance sheet

First Solar, Inc. (NASDAQ:FSLR) has announced its goal to draw maximum revenue from its unsubsidized solar markets. It plans to expand into the regions where its peers are not able to operate significantly. Thanks to its industry-leading cost structure and utility-scale solar expertise, it may be the first solar company which could implement this strategy.

First Solar’s balance sheet continues to be one of the safest in the solar industry, with a debt to equity ratio of 15.3 percent and net cash of $449.5 million. First Solar will attract consumer confidence as its balance sheet is quite strong and will provide sustainability to the company along with favorable financing rates on projects.

EPC model to benefit First Solar

Analyst Ben Kallo goes on to say that the company will get a boost in support margins from the United States projects in the short term. Project pipeline of the company will stock up at lower prices and margin profile will shift as it transitions to EPC model. First Solar, Inc. (NASDAQ:FSLR) has adopted EPC model for low cost, large scale solar in comparison to Solar Thermal projects and natural Gas plants. The proposed plants  have increased into multi-hundred MW range, which follows with an increase in capital requirement.

Some downside risks

Baird Research has maintained a price target of $40 and has suggested some downside risk to the target such as excessive production of module in the industry putting downward pressure on ASPs, Government and economic incentives have supported demand of solar panels and feed-in-tariffs (FiT) can bring down demand for PV. Hindrance in creating the required ecosystem in order to set its foot in the nascent solar market can also bring downward pressure on the stock price. Other factors can be cheap polysiIicon, use of cadmlum Telluride and challenges of being and EPC developer.

Items to watch for

On June 18, First Solar, Inc. (NASDAQ:FSLR) sold off 9.747 million shares of common stock and raised $427.7 million in net proceeds. Secondary offerings in the second quarter assisted the balance sheet, but analysts are waiting to know latest update on secondary use of proceeds during its earning calls.