First Solar, Inc. Holds More Potential Moving Ahead

First Solar, Inc. Holds More Potential Moving Ahead

First Solar, Inc. (NASDAQ:FSLR) posted strong first quarter results, outperforming the consensus estimate and the company’s own guidance.The solar power firm reported a first quarter EPS of $1.10 on revenue of $950 million, which was above the consensus EPS estimate of $0.52 on revenue of $950 million. The increase in revenue was due to 100% of Campo Verde project revenue being recognized in the first quarter earlier than anticipated, says a report from J.P Morgan, released on 6 May 2014, by analysts Paul Coster, Mark Strouse and Paul J Chung.

Demand from Utilities positive for First Solar

Analysts were intrigued by the additional 600 MW to the pipeline originating in North America. According to the CEO, United States utilities are considering solar power in their “integrated resource planning process” due to the increased cost of natural gas, cyclically improving demand for power and stricter regulations on the coal powered generation. Analysts note that this is a vital development for First Solar, which is likely to benefit it as well as other U.S. suppliers of solar systems over the next couple of years.

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First Solar, Inc. (NASDAQ:FSLR) is analyzing different alternatives and restated that at least 200 MW of projects are yield co-ready, but the analysts believe that few months or quarters could be spent in decision-making, so they feel it is too early to “move to a SOTP approach to valuation.” Also, the company can extract substantial benefit from creation of 3rd party yield cos.

2Q estimate lowered

EPS guidance for full year 2014 has been raised, but revenue outlook remains the same. First Solar raised the 2014 EPS to $2.40-$2.80 on unchanged revenue of $3.7-$4.0 billion due to higher than anticipated margins of 17%-18% and expense containment. Owing to earlier revenue recognition for Campo Verde project, analysts have lowered estimates for the second quarter compared to earlier expectations.

First Solar, Inc. (NASDAQ:FSLR) has performed well in terms of capacity, utilization, cost and efficiency. The solar company witnessed year over year improvement on all fronts. Conversion efficiency has also been improving significantly, exhibiting “a superior trajectory Vs poly- and mono-silicon PV solar,” believe analysts, who further note that company’s CfTe technology is on track to stand against P-Si within 3 years.

J.P Morgan analysts have assigned an Overweight rating to First Solar, Inc. (NASDAQ:FSLR), viewing the stock as undervalued relative to the reviving earnings growth expected in 2015. Their price target remains unchanged at $75.00.

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