Shares of First Solar, Inc. (NASDAQ:FSLR) rose almost 2 percent Thursday afternoon after a rough day on Wednesday. The solar panel maker announced a major deal with General Electric Company (NYSE:GE), which dragged its stock downward. Citigroup analysts see the deal as a big positive for First Solar, but others aren’t so sure.

First Solar

Raymond James still bearish on First Solar

Raymond James analyst Pavel Molchanov issued a report to investors after the company’s latest earnings report and the announcement about the General Electric Company (NYSE:GE) deal. In his view, the rapid rise in First Solar’s stock price was the result of Wall Street being “in one of its period of ‘irrational exuberance’ modes” and the market seems oblivious to risks of the company’s long-term profitability. He names the most significant risk as the company’s loss of production cost advantage. He said another big risk is margin pressure caused by industry-wide overcapacity.

He believes Wednesday’s cool-off in First Solar, Inc. (NASDAQ:FLSR) is “a step back towards rationality, though not all the way there yet.” As such, he maintains his Underperform rating on the stock.

First Solar misses estimates

When the solar panel maker released its latest quarterly results, the company not only missed estimates but also cut guidance. He sees this as an indicator of great risks to the company’s future profitability.

During the second quarter of the year, First Solar, Inc. (NASDAQ:FSLR) reported adjusted earnings per share of 39 cents, compared to Raymond James’ estimate of 65 cents and consensus estimates of 52 cents. Molchanov said although margin-related shortfalls are common among commodity PV companies, in this case revenue was the problem. It fell 31 percent sequentially to $520 million, compared to Raymond James’ estimate of $800 million.

First Solar’s lowered guidance is worse than the missed estimates

He said the fact that First Solar cut its guidance is actually a greater cause for concern than the miss on earnings. He said this is especially true in light of market sentiment for a stock that has risen more than 50 percent so far this year. The company lowered its revenue guidance from between $3.8 billion and $4 billion to between $3.6 billion and $3.8 billion. Earnings per share guidance dropped from between $4 to $4.50 per share to between $3.50 and $4 per share.

As a result, First Solar, Inc. (NASDAQ:FSLR) is likely heading for its third year in a row of earnings declines, and Molchanov believes next year will be the fourth year.

First Solar helps GE save face

He compares the deal with General Electric Company (NYSE:GE) to the sale of the Boston Globe to John Henry for $70 million. He sees GE’s sale of its CdTe technology as a way for the company to save face and believes that GE was highly motivated to get rid of the technology because it decided not to commercialize it. First Solar, Inc. (NASDAQ:FSLR) will partner with GE on research and development. He said the deal isn’t “especially meaningful” for either company, and “it remains to be seen who got the better end of the bargain.”