After RBC Capital Market analysts forecasted somewhat of a flat revenue growth in 2015 & 2016, First Solar Inc. (NASDAQ: FSLR) on the S&P 500 index (SPX) was the worst performing stock on Tuesday.
The analysts at RBC Capital Market that projected “flattish” revenue growth for First Solar over the next 2 years also argued that the company’s cost advantage is being somewhat eroded.
The RBC analysts downgraded the stock to an “underperform” status from “sector perform” and also dropped their price target from $54 to $34.
An RBC analyst, Mahesh Sanganeria, predicted a $1.37 per share earnings in 2016, on $3.4 billion revenue. This is down compared to earnings of $3.48 per share from analyst consensus on revenue of $4.1 billion.
Guidance from the company was for earnings of between $3.5 to $5 per share, on revenue of between $3.8 billion and $4.5 billion.
Sanganeria further added that with the high exposure the company has to utility scale type projects & the long-lead times and development cycles of the said projects, there is no anticipation for an upside surprise to the forecasted project revenue.
The company has managed to win large utility scale projects before due to the low costs of its cadmium telluride technologies used to produce their solar panels. However, the company now faces competition from businesses who manufacture crystalline silicone (C-Si).
Previously, the shortage of C-Si supply pushed the prices higher, making it less competitive, but with the huge decline in the polysilicon price & efficiency improvements in manufacturing, analysts predict that the production costs of C-Si modules will only be 2 cents above First Solar by the end 2015, said Mr. Sanganeria.
The company’s shares dropped 7% to trade at $51.04 on Tuesday, while seeing an almost 15% decline in the last year.
MT4 Chart: First Solar