Recently, First Solar (FSLR) stock has been positive. The stock has gained in the last five trading sessions. While broader markets are trading at record highs, solar stocks (TAN) have been relatively slow. On average, solar names have risen approximately 66%. So far, First Solar stock has risen almost 37% this year. SunPower (SPWR) stock has risen more than 62%.
First Solar’s earnings in 2019
Higher corporate investments and better-than-expected earnings helped solar investors this year. However, First Solar has been an exception. Although the stock has hefty gains, it has underperformed its peers. The company’s third-quarter revenues and earnings were below the expectations. For the nine months ending on September 30, First Solar reported total revenues of $1.66 billion, which represents 7% growth YoY. Importantly, analysts expect the company’s revenues to bounce back in the fourth quarter. Based on the estimates, First Solar will likely report $1.82 billion in revenues in the fourth quarter—a surge from $691 million in the fourth quarter of 2018.
On the bottom-line front, the company reported a loss of $55 million for the nine months ending on September 30. First Solar posted a profit of more than $90 million during the same period last year. Analysts expect the fourth-quarter earnings to be around $298 million. As a result, First Solar’s fourth-quarter earnings could be an important trigger for the stock given Wall Street analysts’ upbeat estimates. The company will likely report its next quarterly earnings around the end of February.
Lately, SunPower stock hasn’t seen significant momentum. The stock is sitting at a decent gain. On average, SunPower’s revenues have increased by approximately 8% in 2019. The company turned to profits in the third quarter. However, SunPower stock has been notably weak since late September. Since then, the stock has nearly halved. Analysts are also upbeat about the company’s fourth-quarter earnings. Last month, the company announced plans to spin off its global panel manufacturing business. The spin-off plans didn’t help the stock.
First Solar stock’s valuation
Let’s take a look at solar stocks’ valuations. We’ll consider the forward price-to-sales ratios since the companies are in their growth phases. Currently, First Solar is trading close to 2x given its estimated sales for 2020. In comparison, SunPower stock is trading at a forward price-to-sales ratio of 0.8x. SunPower is trading at a discount compared to First Solar stock.
On the PE ratio front, First Solar stock looks attractive compared to SunPower. First Solar stock is trading at a forward PE ratio of 15x based on estimated earnings for 2020. In comparison, SunPower is trading at 50x its estimated earnings for 2020.
Analysts’ target prices
Wall Street analysts have given First Solar a mean target price of $70.9, which indicates a potential upside of 22% for the next 12 months. Currently, the company is trading at $57.98.
Among the 16 analysts tracking First Solar, eight recommend a “buy,” three recommend a “strong buy,” and five recommend a “hold.” None of the analysts recommend a “sell” as of Thursday.
SunPower offers an upside potential of 11% given its mean target price of $8.96. Currently, SunPower is trading at $8.0.
Among the 12 analysts covering SunPower, five recommend a “hold,” three recommend a “buy,” and four recommend a “sell.”
To learn more, read Solar Stocks: Analyzing the Top Gainers of 2019.