First Solar Stock Could Rally despite Q3 Earnings Miss

Yesterday, top solar panel maker First Solar (FSLR) returned to profits in Q3 2019 after reporting deep losses in Q2. The Arizona-based company missed analysts’ estimates for the quarter and posted earnings per share of $0.29. In Q2 2019, the company reported EPS of -$0.18.

First Solar: Sunnyside up

First Solar investors seemed disappointed with the earnings miss, as the stock tanked in the after-market session on October 24. It was trading in the red in today’s pre-market trading as well.

However, the company’s quarterly earnings don’t seem that bad, as First Solar management raised its full-year outlook. Its operating income guidance range for 2019 was increased to $320 million–$370 million from $290 million–$340 million. However, its sales guidance remained unchanged.

First Solar maintained its full-year EPS guidance range of $2.25–$2.75. This represents an increase of over 80% from its EPS last year. So, robust growth potential backed by upbeat guidance could boost the stock.

FSLR’s revenue fall might concern

First Solar reported total revenues of $547 million in the third quarter against $585 million in the second quarter. The third quarter’s revenues represent a year-over-year fall of 20%. The company posted solid growth in its module business. So far in 2019, the company has reported net bookings of 5.4 gigawatts (or GW), up from 4.3 GW in the first two quarters.

Along with First Solar’s bottom line, investors were keen on its Series 6 production updates as well. Its Perrysburg factory for the Series 6 module started production three months ahead of schedule, taking its total capacity to 5.5 GW. Series 6 is First Solar’s innovative, thin-film PV module. The company forecasts the cost of its Series 6 to decline by 30% in 2019.

First Solar announced yesterday that it became the largest PV module manufacturer in the Western Hemisphere with its start of production at Lake Township, Ohio.

FSLR’s Q2 earnings

In the second quarter, First Solar disappointed with a loss due to higher expenses. Solar stocks have been some of the sweet spots among the broader markets this year. FSLR stock is up more than 30% so far this year, while its peers have gained 60% on average. FSLR has fallen more than 20% since its 52-week high of $69.23 in August.

Peer SunPower (SPWR) plans to report its third-quarter earnings on October 30, and it has reported a loss in the last six quarters. Analysts expect it to continue reporting losses in Q3 2019. SunPower stock has increased by more than 85% so far this year.

Top solar installer Sunrun (RUN) stock is up 44% year-to-date. Solar microinverter makers Enphase Energy (ENPH) and SolarEdge Technologies (SEDG) are up 400% and 150%, respectively, so far this year. Enphase Energy stock has risen more than 30% each time on its record earnings for the last two quarters. For more on this topic, please read Is Enphase Energy Stock Gaining Momentum Again?

First Solar: Analysts’ views

Wall Street analysts gave First Solar stock a mean price target of $72.25, which suggests a potential upside of 30% for the next year. It is currently trading at $55.90. Morgan Stanley cut its price target from $65 to $60.

Among the total 15 analysts covering FSLR, three recommended a “strong buy,” seven recommended a “buy,” and five recommended a “hold.” None of the analysts recommended a “sell” on October 25.

To read about how solar stocks are valued and where they might go from here, read Solar Stocks: Paying Too Much for a Rosy Outlook?