First Solar (NASDAQ:FSLR) is getting downgraded to Neutral from Outperform at Credit Suisse this morning following earnings out last night. The firm is lowering their target to $135 (prev. $200).
Earnings momentum peaking. While there has been a widespread concern on FSLR’s margins, FSLR’s stock in the meantime has benefited from its consistent track record of beat and raise quarters in the past. While CSFB expected upside to the quarter, FSLR's reported Q2 results were well above consensus. However, they think Q3 will be the last good quarter for a while for similar upside surprises; and they expect a period where estimate resets are asymmetrically skewed to the downside as we move into 2010. Firm expects the stock to look ahead of this peaking earnings momentum and pull back to lower levels.
Reasons for downgrade (short summary):
1) earnings momentum peaking. CSFB thinks Q3 will be the last good qtr for a while for similar upside surprises; and they expect a period where est resets are asymmetrically skewed to the downside as we move into 2010.
2) rebates could accelerate price competition and will sharpen focus for customers and investors around pricing. We also expect Asian c-Si suppliers to match or beat these rebates in return.
3) ASP declines are winning the battle over vol growth;
4) rate of cost reductions could moderate. Our call is a reflection of the new risk/reward on the stock; still believe FSLR has a compelling technology and capable mgmt team that can deliver on longer-term roadmaps.
Notablecalls: This is a powerful downgrade from CSFB Solar Energy team. I'm actually surprised they didn't downgrade the stock to Underperform (the language is that strong). The stock will have 8-10% downside in store today.
Earnings momentum peaking. While there has been a widespread concern on FSLR’s margins, FSLR’s stock in the meantime has benefited from its consistent track record of beat and raise quarters in the past. While CSFB expected upside to the quarter, FSLR's reported Q2 results were well above consensus. However, they think Q3 will be the last good quarter for a while for similar upside surprises; and they expect a period where estimate resets are asymmetrically skewed to the downside as we move into 2010. Firm expects the stock to look ahead of this peaking earnings momentum and pull back to lower levels.
Reasons for downgrade (short summary):
1) earnings momentum peaking. CSFB thinks Q3 will be the last good qtr for a while for similar upside surprises; and they expect a period where est resets are asymmetrically skewed to the downside as we move into 2010.
2) rebates could accelerate price competition and will sharpen focus for customers and investors around pricing. We also expect Asian c-Si suppliers to match or beat these rebates in return.
3) ASP declines are winning the battle over vol growth;
4) rate of cost reductions could moderate. Our call is a reflection of the new risk/reward on the stock; still believe FSLR has a compelling technology and capable mgmt team that can deliver on longer-term roadmaps.
Notablecalls: This is a powerful downgrade from CSFB Solar Energy team. I'm actually surprised they didn't downgrade the stock to Underperform (the language is that strong). The stock will have 8-10% downside in store today.
1 comment:
CSFB was dead wrong on his earnings preview saying he had a positive bias and a $200 price target on the stock on July 30th. And now, on July 31st he moves to a neutral with language that should be an underperform. He obviously is stepping into an underperform call. His estimates for 2009 are still too high.
Look for him to downgrade the stock within 2 weeks based on additional datapoints.
Kaufman analyst Theodore O'Neill got it right. With his downgrade back in June 24th with a 86 price target.
This stock is still being kept up for the large holders to get out. It will break $100.
Post a Comment