Monday, July 16, 2007

First Solar (NASDAQ:FSLR): BAC ups tgt to $140

- Banc of America is yet again upping their tgt on First Solar (NASDAQ:FSLR) saying the co has the best fundamentals in the business. Tgt goes to $140 from $115. In BAC's view, FSLR's 7/9 announcement of $1.3 billion of new sales contracts validates its position as the best model in the PV business. FSLR's industry-low cost structure ($1.29/watt) and limited competition in thin film enables FSLR to command significant demand while maintaining impressive profitability (45% gross margins at full ramp in Q1).

Next shoe to drop: They also believe there may be upside potential to their 2Q07 EPS estimate of $0.04 and the Street Consensus of $0.03 if FSLR ramped its new facility in Germany faster than anticipated.

Future shoe: U.S. contract. FSLR has not announced a contract for the U.S., which is expected to grow to be the world's largest solar market. Based on industry contacts, the firm believes there would be significant demand for FSLR's thin film modules in the U.S. They expect to hear more about a U.S. contract in the next 6 months.

Notablecalls: Barron's is out negative on First Solar today saying some pretty nasty stuff about the co's tech. Also, following its very strong run, FSLR's stock is susceptible to a pullback ahead of 2Q07 as investors look to take profits. They are scheduled to report on Aug 2. From this perspective the Barron's piece looks well-timed.

In the ultra-st I think the stock will be gapped down but will recover some of the lost ground. FSLR continues to be a mo-mo fav and BAC's note will provide a nice cushion.

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