First Solar, Inc. Short Squeeze Repeats Itself

First Solar, Inc. (NASDAQ:FSLR) shares rose more than 4% in afternoon trading today as sentiment begins to shift toward the positive in the wake of the company’s analyst day. In a report dated March 20, 2014, Raymond James analyst Pavel Molchanov maintained his Market Perform rating but said he continues to lean slightly to the negative for a number of reasons.

First Solar, Inc. Short Squeeze Repeats Itself

First Solar shares rocket upward

This week shares of First Solar, Inc. (NASDAQ:FSLR) began climbing during the company’s analyst day. According to Molchanov, there was short squeeze on the analyst day which was a “near carbon copy” of what happened last April. He notes that the company does have a better balance sheet than the majority of its major peers and has a significant backlog of legacy products offering “reasonable visibility.”

However, he sees many risks regarding the company’s long-term profitability. Specifically, he named “the unclear evolution of thin film’s economics versus crystalline PV.” He also said they believe First Solar, Inc. (NASDAQ:FSLR)’s 2015 guidance is “quite aggressive.”

First Solar updates guidance

This week First Solar, Inc. (NASDAQ:FSLR) updated its 2014 and 2015 guidance. The company lowered its earnings per share guidance for this year to between $2.20 and $2.60. That’s at the far low end of the $2.50 to $4 range provided last April. Molchanov doesn’t see this weak guidance as surprising because even before the company cut guidance, it was on track to post declines in earnings for a fourth year.

The Raymond James analyst notes that First Solar, Inc. (NASDAQ:FSLR) did raise its 2015 guidance by a bit. The company’s management said they will be holding projects for a longer time before selling them so that they can “capture better economics,” which will shift some of First Solar’s revenues into 2015. First Solar has tightened its 2015 earnings per share range to between $4.50 and $6 from $4 to $6 a share. Molchanov sees this as a “reasonable approach” but says that it doesn’t take care of the continual choppiness which has been plaguing the company’s financials for some time.

First Solar reveals GE partnership, highlights expansion

One of the big reasons investors have been so positive on First Solar, Inc. (NASDAQ:FSLR) this week is because the company highlighted its partnership with General Electric Company (NYSE:GE) at its analyst day. The two companies have already been collaborating, but they will expand that partnership to use First Solar moduleswith GE’s 1500v inverter / transformer system. The goal is power plant engineering which results in bigger PV solar arrays while reducing the number of inverter / transformer stations which are required. This would result in lower installation and maintenance costs.

In addition, First Solar, Inc. (NASDAQ:FSLR) continues to look for opportunities in emerging markets. Management said one of their focus markets is India, partially because CdTe modules do better than crystalline modules in environments with high temperature and humidity.

In spite of these positives, Raymond James analysts see First Solar, Inc. (NASDAQ:FSLR)’s valuation as being very rich for a cyclical business, especially because the company has provided “limited visibility” on its profitability metrics after this year.