First Solar’s “blowout” 3Q sparks solar frenzy

November 14, 2007 – First Solar posted a “blow-out” 3Q07 last week and announced two long-term supply deals requiring a new manufacturing facility, news that sent its share prices soaring through the roof (they’ve since come back down to earth somewhat).

On Nov. 7, FSLR said 3Q earnings rocketed to $46.0M vs. $4.3M a year ago — a preposterous 969.8% increase — on nearly threefold better sales of $159.0M. The company also has signed long-term (2008-2012) module supply agreements with a subsidiary of Australian investment/asset manager Babcock & Brown and Ecostream Switzerland GmbH, representing a 557MW expansion of module volumes and $1B in sales. A fourth plant with four production lines will be built in Malaysia, adjacent to three currently-being-built sites (12 lines), scheduled to start production in 2H09.

Investors wasted no time jumping on the bandwagon. Credit Suisse’s Satya Kumar reiterated an Outperform rating and upped his price target to $250 from $160. “As investors ponder the implications of $100 oil, potentially weakening economy, weak dollar, geopolitical oil risks, and threats from global warming, we cannot but stress how FSLR/SPWR [SunPower] are excellent plays over these big themes in the stock market,” he wrote.

Lehman Bros’ Vishal Shah showed more restraint, increasing his range to a paltry $220/share (also repeating an Overweight rating), predicting that near-term demand will exceed supply, and both capacity expansions and cost reductions will exceed expectations.

Meanwhile, Merriman Curhan Ford’s Brion Tanous raised his FSLR stock rating to Neutral from Sell, but hiked his EPS estimates for 2007, 2008, and 2009.

Elsewhere, Deutsche Bank analyst Steve O’Rourke raised his price target to $220 and reiterated his Buy rating, and CIBC World Markets’ Adam Hinckley set a price of $230.

Barrons analyst Eric Savitz noted that the rising tide of FSLR lifted many other solar boats as well, including Canadian Solar, Evergreen Solar, JA Solar, Energy Conversion Devices, MEMC, SunPower, and Suntech.

Broadpoint Capital analyst Colin Rusch also spouted optimism across the sector, starting coverage of several firms (FSLR, Hoku Scientific, and DayStar Technologies) with “Buy” ratings, noted the Associated Press.


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