First Solar shares retreat after day of big gains

Shares of First Solar tumble a day after surging more than 50 pct. on strong guidance

Associated Press

NEW YORK (AP) -- First Solar Inc. fell Wednesday, as it gave back some of the gains it posted yesterday, after the company issued a better-than-expected outlook for 2013 and solid predictions for the following two years.

THE SPARK: Tempe, Ariz.-based First Solar told analysts Tuesday that it expects to post a 2013 profit of $4 to $4.50 per share on $3.8 billion to $4 billion in revenue. Analysts polled by FactSet expected $3.60 per share in earnings and $3.17 billion in revenue.

The company also set 2014 profit and revenue targets that bracketed analysts' estimates and issued a much better-than-expected profit and revenue outlook for 2015.

THE BIG PICTURE: Like other solar companies, First Solar has been hurt by a steep drop in solar product prices that came after the Chinese government pushed hundreds of small players into the market. New companies continued to spring up in 2011 even after European countries, hammered by the global economic crisis, cut subsidies to solar companies. Supplies surged as sales growth stalled, forcing sellers to slash prices to unprofitable levels.

First Solar said Tuesday that it expects 2013 module shipments of 1.6 gigawatts to 1.8 gigawatts, before rising to 1.8 gigawatts to 2.2 gigawatts next year and to 2.3 gigawatts to 2.7 gigawatts in 2015.

THE ANALYSIS: Raymond James analyst Pavel Molchanov backed his "Market Perform" rating on the stock saying that while the guidance released at the analyst meeting "certainly made a splash," he's not going to get carried away by the sudden swell of optimism.

Molchanov noted that unlike other solar companies, First Solar has stayed profitable as a result of several large-scale utility projects. Things could get tougher once those projects are gradually completed, he said.

Susquehanna analyst Mehdi Hosseini boosted his price target for First Solar by $12 to $40. Hosseini kept a "Neutral" rating and said he's more confident in the value of the company's assets, but he's not ready to recommend buying shares until the company can show it's able to increase its business backlog.

THE SHARES: Down $2.10, or 5.3 percent, to $37.25 in morning trading, after falling as low as $36.36 earlier in the session. On Tuesday First Solar rose as much as 52 percent and hit a new 52-week high, before retreating to close up, 46 percent at $39.35.

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