First Solar, Inc. (NASDAQ:FSLR) Gets Ready to Rock or Get Rocked: What to Know Into the Report

First Solar, Inc. (NASDAQ:FSLR) will turn in its Q3 report card at the close today and jump on the call about a half hour later. The market is looking for a consensus EPS at $0.40 on revs of $698 mln.

Shares of FSLR will come into the report with the stock at its lowest levels in 15 months. Naturally, some of that is coming from the shift we have seen in broad market sentiment. In addition, Solars have been under pressure following word out of China that solar initiatives for 2020 and going forward may be rolled back. That’s one of the big demand drivers. Taking that away immediately raises concerns about a PV glut building in the market. So the whisper here is probably not too high a bar given sentiment around the industry.

First Solar, Inc. (NASDAQ:FSLR) trumpets itself as a company that provides photovoltaic solar energy solutions in the United States and internationally. It operates through two segments, Components and Systems.

The Components segment designs, manufactures, and sells cadmium telluride solar modules that convert sunlight into electricity. This segment offers its products to integrators and operators.

The Systems segment provides turn-key photovoltaic solar power systems or solar solutions, such as project development; engineering, procurement, and construction; and operating and maintenance services to utilities, independent power producers, commercial and industrial companies, and other system owners.

The company was formerly known as First Solar Holdings, Inc. and changed its name to First Solar, Inc. in 2006. First Solar, Inc. was founded in 1999 and is headquartered in Tempe, Arizona.


Key Themes

The big point is this: FSLR’s advantage has been about cost into the market. That advantage is undermined when other solar companies are dumping cheap PV modules on the markets.

That translates into a need to watch gross margins this afternoon both for Q3 and for the company’s look ahead.

Gordon Johnson (Vertical Research) upgraded FSLR to Hold from Sell earlier today. He is maybe the “axe’ in the space. And he has been right in leaning on the stock for a while now. So, it’s possible that any future issues have been discounted into price in front of this report.

If that’s true, then any upside guidance movement could have an outsized positive impact on the stock in after-hours trading.

Technically, the stock is trading under all its major moving averages, and has pulled back by nearly 50% from its ytd highs. The 50% level would coincide with the $40 level.

FY18 Guidance: Net Sales $2.5-2.6 bln, Gross Margin 20.5-21.5%, Operating Expenses $390-400 mln, Operating Income $120-160 mln. EPS $1.50-1.90, Net Cash Balance $2.2-2.4 bln, Operating Cash Flow $100-200 mln, Capital Expenditure $800-900 mln, Shipments 2.8-2.9 GW, Potential Booking 8.3 GW.

We would also note that the start of Series 6 line in Vietnam was expected in Q3.

Last quarter, FSLR reported Q2 (Jun) loss of $0.46 per share, excluding non-recurring items, $0.43 worse than the Capital IQ Consensus of ($0.03). Revenues fell 50.4% year/year to $309 mln vs the $509.19 mln Capital IQ Consensus. Gross Profit came in at 2.6%.

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