21 Oct

How Is First Solar Stock Placed ahead of Its Q3 Earnings?

WRITTEN BY Vineet Kulkarni

Top solar panel maker First Solar (FSLR) plans to report its third-quarter earnings on October 24. According to Wall Street analyst estimates, First Solar could report earnings per share of $1.19 for the quarter. In Q3 2018, the company reported earnings per share of $0.54. Notably, First Solar has missed analysts’ estimates on revenues as well as earnings for the last three consecutive quarters.

FSLR stock looks weak ahead of Q3 earnings

First Solar stock was on a terrible downtrend recently and is currently trading close to its seven-month low. It has fallen more than 20% since its 52-week high on August 1. To add to its woes, Morgan Stanley cut its price target from $65.00 to $60.00 on October 17. It will be interesting to see whether First Solar’s Q3 earnings boost its stock in the short term.

Earnings drivers

According to analyst consensus estimates, First Solar could report total revenues of $1.07 billion in the third quarter. This represents a 58% increase compared to Q3 2018. In Q2 2019, the company posted revenues of $585.0 million.

In its most recent quarterly release, First Solar management increased its earnings guidance for the rest of the year. A similar upbeat commentary from the company’s management could also bring some optimism to its investors this quarter. First Solar gave an EPS guidance range of $2.25–$2.75 for this year, which represents an 83% rise year-over-year.

First Solar’s update on its Series 6 PV module should be a crucial part of its upcoming quarterly release. During its second-quarter earnings, the company affirmed that it anticipates the cost per watt of the Series 6 to drop nearly 30% this year. This decreased cost could have a positive impact on its bottom line. Series 6 is First Solar’s efficient, cost-effective thin-film PV module.

Peer SunPower (SPWR) plans to report its third-quarter earnings on October 30. SPWR stock has soared more than 90% so far this year. According to analyst estimates, SunPower could continue reporting losses in the third quarter.

Top solar installer Sunrun (RUN) stock is up 56% year-to-date. Based on estimates, Sunrun expects to report earnings per share of $0.16 in the third quarter. This represents an increase of more than 100% compared to Q3 2018. Tiger Global Management increased its stake in Sunrun to 25.3% on October 8.

How is First Solar stock placed?

First Solar stock is currently trading at $55.20, almost 10% and 5% below its 50-day and 200-day moving average levels, respectively. The large discount to both its key support levels indicates weakness in the stock.

As we mentioned earlier, FSLR stock could see a boost if the company’s management paints an upbeat picture for Q4 and beyond. First Solar stock has gained more than 50% since its 52-week low of $36.51 in December 2018. The stock has gained 30% so far this year.

First Solar stock is currently trading at an RSI (relative strength index) of 31, close to the oversold zone. This indicates an imminent change in the stock’s direction. SunPower stock is also currently trading close to the oversold zone.

Valuation

First Solar stock looks attractive from a valuation standpoint. It is currently trading 15x its estimated earnings for the next 12 months. This appears to be a significant discount compared to its five-year historical average valuation.

In comparison, SunPower and Sunrun are currently trading 44x and 35x their respective forward earnings. To read more on solar stocks’ valuation, please read Solar Stocks: Paying Too Much for a Rosy Outlook?

First Solar: Analyst price target

According to Wall Street analysts, First Solar stock has a mean price target of $76.64, suggesting an estimated upside of 39% for the next year. Of the 15 analysts covering First Solar, seven recommended a “buy,” three recommended a “strong buy,” and five recommended a “hold.” None of the analysts recommended a “sell” on October 21.

Morgan Stanley increased SunPower’s target price from $5.50 to $5.70 last week. Analysts have given SunPower stock a mean price target of $10.71 against its current market price of $9.58. This indicates a potential upside of 12% for the next 12 months. Among the 12 analysts covering SunPower stock, five analysts recommended a “hold,” three recommended a “buy,” and four recommended a “sell.”

Sunrun has a mean price target of $22.40 against its current market price of $17.00. This implies an estimated upside of 32% for the next 12 months. Among the 10 analysts covering it, six recommended a “buy,” two recommended a “strong buy,” and another two recommended a “buy.”

Solar microinverter Enphase Energy (ENPH) is one of the top-rallied stocks among the broader markets. It currently looks strong after a recent steep decline. To learn more, please read Is Enphase Energy Stock Gaining Momentum Again?

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