FBR is optimistic about First Solar’s (FSLR) Q2 earnings, but pessimistic about its longer-term outlook. The same holds true for fellow solar powerhouse Suntech Power (STP):
Although we expect STP to meet or exceed our 2Q [reported August 7th, 2008] estimates and guide to above consensus estimates driven by particular strength in Spain, and as projects are pulled in before the current FIT scheme expires in September, we are incrementally more cautious on CY09 and beyond.
FBR’s concerns include:
- the pushout in the rollout of Pluto [Suntech’s low-cost, high-yield panel technology] (from 2H08 into CY09) and lack of additional details on the company’s strategy on how to address/integrate Balance of the System (BOS)
- continued high cost of poly to cause gross margin declines on a sequential basis, while ASPs [Average Selling Prices] are expected to have been flattish in 2Q
- the overall pricing environment for 4Q projects has weakened over the past few weeks
- geographies like Italy, Greece, and Korea are not large enough to make up for the slowdown in Spain in CY09
FBR believes the recent sell-off in stock may have “already dialed in some of our concerns”, but they’re still bearish. The firm encourages profit taking on any relief rally.
FBR maintains UNDERPERFORM on Suntech Power (STP), target price cut from $48 to $39.
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