First Solar, Inc. (NASDAQ:FSLR) shares tumbled 8.87% on Thursday and went down another 2.11% on Friday to $55.31. Shares of the company have declined more than 22% in the last 30 days. Goldman Sachs analyst Brian Lee said in a research note yesterday that the strength in the stock due to investor optimism around a potential YieldCo announcement offers a lucrative opportunity to sell shares.
First Solar’s risk-reward ratio less appealing than peers’
Goldman Sachs has a Sell rating on the stock with $49 price target. The research firm says First Solar has an upside potential, but it’s relatively modest at around 10%. Its risk-reward ratio isn’t very appealing compared to peers due to cash flow and company-specific growth headwinds. Brian Lee says a short-term optimism around the YieldCo development ahead of Q3 earnings is an opportunity to unload shares.
What’s more, Lee said a YieldCo isn’t viable at least until mid-2015 due to the backlog of unsold projects. However, NextEra Energy Inc (NYSE:NEE) and TerraForm Power Inc (NASDAQ:TERP) last month expressed interest in third-party acquisitions. Both companies will likely focus on wind and solar assets along with utility-scale projects.
Stifel bullish on First Solar
Stifel said in a research note last month that NextEra and TerraForm’s move will be positive for First Solar’s unsold project portfolio. That’s why Stifel analyst Sven Eenmaa is bullish on First Solar with $81 price objective. First Solar stock has been given a consensus Hold rating by 18 research firms covering the stock. Three analysts rate it as Sell, six have a Hold rating while the remaining recommend their clients to buy the stock.
GTM Research is optimist about the U.S. solar industry. The research firm forecasts U.S. solar installations to grow 36% YoY to 6.5GW by the end of this year. First Solar trades at 12x forward earnings estimates. The company estimates its FY2014 revenues to come in at $3.7-$4 billion with EPS of $2.40-$2.80. First Solar is also expanding in international markets such as Germany, Chile, Japan, the UK and India.