There are a lot of factors to consider as far as hot stock picks are concerned and First Solar, Inc. (NASDAQ:FSLR) is probably a good example based on its performance.
First Solar’s stock price is currently miles off the expected value. The stock has a $65.92 target price yet its actual price on December 13 peaked at $45.30 which is an improvement from the stock’s $36.51 5-week low. The company’s stock gained by 3.27% in the past one month but the price tanked by an overall -10.84% in the last three months and by -17.25% over the last six months.
Analysts predict that First Solar’s stock price will rally by 94.95% and have set the target price at $85 which is still some way off from the current stock price. However, the company recently provided a 2019 outlook which analysts believe is constructive but a bit soft. First Solar expects its EPS for FY 2019 to be between $2.25 and $2.75. Analysts think that the estimates are soft considering that the analyst consensus estimate is slightly higher at $2.98 for the company’s net sales.
The company expects its net sales to be between $3.25 billion and $3.45 billion although the net sales consensus estimate was set at $3.02 billion. First Solar also estimates that its net cash balance for the year-end 2019 will be between $1.6 billion and $1.8 billion. The decline towards the end of the current year is mainly due to the company’s continued investment in Series 6 capacity.
First Solar also expects to ship around 5.4-5.6 GW and it anticipates its capex between$650 million and $750 million as well as a 20% to 21% gross margin. Meanwhile, Goldman Sachs downgraded its First Solar price target to $46 from $48. This was after First Solar announced its price outlook for 2019.
Goldman Sachs thinks that the outlook sounded bullish and was at some point.
Analysts from the financial firm also believe that the outlook was rather weak although they also believe that the First Solar is trying to be preservative with its guidance. The Goldman Sachs analysts also feel that the weak guidance is part of the company’s plan to alleviate bear concerns.
First Solar gave a revenue guidance between $3.25 billion and $3.45 billion and it happens to be higher than the Raymond James’ estimate. The company also expects its gross margin to be between 20 and 21 percent. This is 200 basis points lower than the Raymond James’ estimates. However, it does account for the off-chance that the EPS will be bullish.
Raymond James lowered its EPS estimates from $2.75 to $2.62 so that its estimate can be more in tune with First Solar’s recently announced EPS guidance at $2.25-$2.75. Ramond James, however, expects a noteworthy increase in First Solar’s revenue in the next two years. This expectation is as a result of lower startup costs, thus easing the pricing pressure.
Unfortunately, not everyone shares the same sentiments. An analyst called Weinstein from Credit Suisse believes that things might turn out different by 2020. He believes that the lack of clarification for the Series 6 cost structure and higher than anticipated startup expenses might result in unfavorable gross margins by 2020.
About First Solar
First Solar is one of the leading companies in the renewable energy sector with a particular focus on the solar industry. The company focuses on developing solar power equipment creating large solar power plants. Its goal is to deliver renewable energy to its clients at an effective and cost-efficient manner. The company has also invested heavily in R&D to boost energy yield.