First Solar is scheduled to release its next earnings report after closing bell, and on average, Wall Street is expecting losses of 12 cents per share on $637.9 million in revenue. A trio of firms have upgraded the company over the last week or so. However, most are still not quite ready to buy, as two of the three (JMP Securities and Credit Suisse) upgraded the stock to the equivalent of a Neutral or Hold rating.
First Solar could benefit from higher tariff
One thing that could be helping to boost First Solar shares ahead of tomorrow’s earnings report is a petition filed by Suniva, a small solar cell and module manufacturer. The company petitioned the U.S. International Trade Commission for a temporary tariff on solar modules and cells manufactured in China, and since that petition, at least four firms have weighed in on the impact it could have on First Solar.
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Suniva claims that the products are being sold at prices that are below-market, so it wants tariffs to be increased so that the imported panels will be priced at 78 cents a watt or more. The company wants imported solar cells to cost 40 cents a watt or more, which is reportedly twice the current market cost for this type of product, according to the Fool.
It certainly seems like a strange move on Suniva’s part, given that it has filed for bankruptcy. However, it’s believed that First Solar and other solar firms could benefit from the petition. Perhaps this is playing into SolarCity parent Tesla’s stock price surge today, which carried it to another record high.
Benefits depend on tariffs being reserved for China
JMP Securities analysts said last week that the petition may be “materially positive” for First Solar if it causes price increases on solar panels to make them more competitive with imported panels. The firm clarified that about three-quarters of the company’s panels are imported from Malaysia where they are manufactured. As a result, JMP is assuming that the solar panel company can move keep importing its products without being subjected to tariffs imposed specifically on solar products from China.
Roth Capital analysts see a strong possibility that the petition will be granted and provide benefits to First Solar in the process. As such, they upgraded the company’s stock to Buy and set a price target of $40. Morgan Stanley analysts also feel that if the petition is granted, it will impact only companies importing products from China, which would enable First Solar to avoid the tariff since most of its products come from Malaysia. However, they add that the solar industry might be of a lower priority for the Trump administration because the U.S. solar manufacturing industry only employs 2,000 people, compared to 260,000 for the broader solar installation industry.
Credit Suisse analysts upgraded the company as well, but in addition to the Suniva position, they also noted that 23% of its stock is sold short. As such, if short-sellers representing a significant amount of the shares currently being sold short start expecting a benefit from that petition, it could drive a short squeeze.
What to watch in First Solar’s earnings report
First Solar shares have been struggling since the company announced plans to restructure and skip over its Series 5 module to move forward with Series 6. Management decided to do that because by the time commercial volumes could be produced, it would not be priced competitively, which demonstrates how closely pricing weighs on the company’s stock.
Seeking Alpha contributor Morningsidepark cautioned about first-quarter bookings, saying that if net bookings were less than 200 megawatts, it would be a negative. The expert also warned that if expected module shipments fall more than 400 megawatts, it would be negative.
Shares of First Solar ticked lower by as much as 0.07% to $29.53 during regular trading hours on Tuesday.