First Solar, Inc. shares pulled back on Wednesday following a downgrade from analysts at Argus, who are concerned about reduced earnings visibility. On the surface, their view stands in stark contrast to a view from one Seeking Alpha contributor on Tuesday, but on a deeper look, they do resonate with each other.

Deutsche Bank analysts downgraded First Solar as well, nearly two months ago.

First Solar

First Solar moved to Hold

In a report dated August 30, Argus analysts Stephen Biggar and Jaspar Hellweg said they have downgraded First Solar from Buy to Hold and suspended their target price. However, that downgrade is just a 12-month rating, as their five-year rating still sits at Buy.

They slashed their 2017 earnings estimate to $2.50 per share from $4.25 per share because they expect the solar panel company to be hurt by the extension of tax credits for solar projects. The tax credits have been extended to 2019, the Argus team notes that solar customers have been in a rush to complete their solar projects ahead of the previous deadline (resulting in strong earnings earlier this year), which was this year. However, they won’t feel the same urgency in 2017 and 2018 because of the extension.

First Solar remains strong despite challenges

Biggar and Hellweg noted that First Solar’s project backlog is now softer than it was due to the extension. As a result of the softness, earnings visibility has been reduced. However, they still see the company as being the “best-positioned company in the solar industry.” They expect First Solar to remain profitable even as competitors have been hurt by the glutted solar panel supply and reduced pricing power.

They also like First Solar’s investment in cadmium telluride technology, which they believe will offer cost advantages over polysilicon and other tech that has become commoditized. They also like the company’s positive cash flow position and “solid” balance sheet, and they expect it to benefit gradually from greater restrictions on fossil fuel-based power and greater government and public support for clean energy.

First Solar is “relatively undervalued”

Meanwhile, in a Seeking Alpha post on August 30, Jerome Yue argued that First Solar is a “relatively undervalued stock with more downside to come.” His target price is $56 per share, and he notes that the stock still has downside momentum, but he believes that it might be a good long-term play. He notes that the solar panel firm has a P/E of less than 10, which is one of the lowest multiples of the other solar firms on his list.

He adds that the company’s return on invested capital is 15.93%, which is good because anything higher than 15% “indicates that the company has a strong economic moat and is well suited for growth.” First Solar’s weighted average cost of capital is lower than its ROIC, which is good because if it higher than ROIC, then there is value destruction because the company can’t position itself for growth because every expansion causes it to lose money.

He adds that EV/ revenue and EV/ EBITDA are also low compared to the company’s peers, and its price to sales ratio and price to book ratio are both low enough to fit his investment criteria. He also mentions that the company’s debt to equity ratio is one of the lowest in the solar industry and sums up by describing it as “one of the best value-for-money stock [sic] out there that investors interested in the solar sector should consider.” He believes First Solar is undervalued compared to its peers and likes its management and strong balance sheet.

However, he sees more near-term downside ahead (just as the Argus team sees for the next 12 months) based on a double top that recently appeared on the stock chart showing a Moving Average Convergence Divergence and On-Balance Volume. Such a double top suggests that First Solar shares could fall further from where they are.

Shares of First Solar slipped by as much as 2.14% to $37.43 during regular trading hours on Wednesday.