Shares of solar energy technology provider First Solar (FSLR) are down $1.26, or 1.8%, at $68.98 after Maxim Group’s Aaron Chew this morning raised his rating on the shares to Hold from Sell, writing that the shares’ steep decline since July �� the stock is down about 42% since July 29th �� means that the risk-reward trade-off is now more balanced for the shares.?
Last week First Solar said it would seek private financing for one of its U.S. solar panel installations, called “Topaz,” after deciding it wouldn’t be able to meet the deadline to file documents about the project necessary to secure funding with the Department of Energy. The Department’s budget for making loans to fund renewable energy technology has come under attack by members of Congress, who have questioned the entire funding mission following the bankruptcy of solar firm Solyndra.?
Chew did cut his estimates, as recent cost improvements will be offset by lower average selling prices as a result of the lost funding for Topaz. He cut his 2011 EPS estimate to $6.32 from a prior $8.39, while cutting his 2012 estimate to $12.13 from a prior $12.41.?
Nevertheless, he sees reason to be optimistic about the stock:
Near term, however, we expect the sale of its four major U.S. projects by 2011 year-end to drive a relief rally in the stock, while we now recognize possible upside surprises from its new efficiency improvements yielding lower cost/W, possible new project/PPA wins, and declining short interest given the stock’s recent decline.
Chew warns that First Solar still faces long-term challenges from the declining cost of solar modules based on the rival polysilicon-based technology. (For a whole discussion of that, see last week’s post.).?
But such problems could “take a year or two to play out,” he thinks, and ! so ̶ 0;we expect the stock to trade in a new, albeit wide, range of $55-$80 (8x to 12x our estimate for normalized EPS after 2013 of $7.00).”
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