JPMorgan analysts have increased their price target for First Solar, Inc. (NASDAQ:FSLR) and SolarCity Corp (NASDAQ:SCTY), reflecting the upside potential for solar stocks. JPMorgan analysts Paul Coster, Mark Strouse and Paul Chung said in a research note that First Solar’s second-quarter results will be low-point of FY2014 due to project timing. But the Tempe, Arizona-based company’s long-term prospects remain intact.
First Solar has significant growth opportunities in China, India, Latin America
The research firm increased its price target on First Solar from $75 to $76 with an Overweight rating. JPMorgan expects the solar panel manufacturer’s Q2 revenues to come in at $699 million with $0.25 in EPS, lower than the Wall Street consensus of $795 million and $0.33 respectively. For the full year, analysts forecast $3.90 billion in revenues with $2.90 in pro-forma EPS. First Solar has significant growth opportunities in countries that have little access to cheaper gas such as China, Latin America and India.
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JPMorgan believes that First Solar’s thin-film technology should help the company further its cost/MW lead over the poly-silicon solutions in the utility market over the next three years. The company’s cost is expected to decline from $0.56/watt in Q4, 2013 to $0.38/watt by 2016, putting First Solar in a better position to compete. Moreover, the Tempe-based company plans to introduce TetraSun’s high-efficiency panels this year, opening up opportunities in residential, commercial and community-scale projects.
SolarCity’s customer acquisition momentum will continue
JPMorgan raised its price target for SolarCity from $72 to $77. The research firm maintained its Overweight rating on the stock. Analysts expect SolarCity’s customer acquisition momentum to continue. The company has 29% share in the residential solar market. Analysts expect SolarCity to provide further details on the Silevo acquisition at its second-quarter earnings call. It’s yet to be seen how the company will finance its 1GW solar plant in New York.
The research firm expects the San Mateo-based company to report second quarter retained value of $1.55 billion, a growth of 108% from the same quarter last year. Q2 megawatt deployment is expected to jump 104% YoY to 108MW. JPMorgan forecasts revenues of $63.3 million with a net loss of $0.99 per share.
SolarCity shares were down 1.15% to $64.15 at 12:35 PM EDT on Thursday.