First Solar (FSLR) Upgraded Despite Risks of Price Pressure and Margin Compression

Collins Stewart analyst Daniel Ries upgrades First Solar (FSLR) to Buy. He sees low risk related subsidy declines and positives in Malaysia. Barron’s:

Despite risks that subsidies will subside in 2009, writes Ries, “First Solar can hit lower price points if they are needed to drive demand as feed-in tariffs are reduced.” Calling First Solar “providers of the lowest cost solution on the market,” Ries goes on to say the company’s prospects for selling to utilities in both the U.S. and Europe countries have improved.

Ries thinks the construction of a plant in Malaysia, currently “progressing well,” is just one factor that may boost production significantly starting late next year.

This sounds nice, but we can’t remember a single instance in which a stock rose in the face of price pressure and margin declines (which is what FSLR will experience if it is forced to cut prices). FSLR may be the low-cost producer but this doesn’t mean its multiple won’t compress.

Collins Stewart’s Ries was also sure to mention the usual risks associated with FSLR:

  • Tellurium (a rare element FSLR uses) is scarce
  • Government subsidies could dry up too quickly
  • Increased competition

Collins Stewart upgraded First Solar (FSLR) from Hold to BUY, target price $320.

See Also:
Latest First Solar (FSLR) News and Analysis Takes Down First Solar (FSLR)
Lehman Jacks First Solar (FSLR) Target to $335, Sees Q2 Upside(FSLR)
First Solar (FSLR): Here’s Why Three of Those Concerns Are Overblown

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