FirstSolar Customers Hoarding Inventory - ThinkEquity

ThinkEquity’s Jonathan Hoopes this morning made an aggressive call on First Solar (FSLR), asserting that a “high-level inventory analysis” of six of the company’s major customers lead him to conclude that there maybe be substantial numbers of First Solar panels sitting in customer warehouses. And he says that they aren’t likely to move out soon, “given weakening economies, lower natural gas prices, higher interest rates and tougher underwriting requirements.”

Hoopes contends that global solar demand headwinds are unlikely to subside for at least the next few quarters. “Take-or-pay contracts are only as good as the counter-party’s willingness and ability to do either,” he notes. Hoopes points out that Q-Cells (QCSLF.PK), on its December 9 conference call, said it will allow a flexible delivery schedule for customers and will also offer discounted prices to help share the burden.”

Adds Hoopes: “If the biggest crystalline cell manufacturer is not immune from global demand headwinds, we don’t see how the largest thin-film cell manufacturer will be either.”

Hoopes cut his rating on the stock today from Buy to Source of Funds; he cuts his price target to $105, from $175. He lowers his 2009 EPS estimate to $8.47, from $8.69 (that is still way above the Street consensus at $7.24); for 2010, he goes to $8.69, from $10.34.

FSLR today is up 59 cents, or 0.5%%, to $118.26.

Comments

[Daryan:]

Most overpriced and hyped stock in the entire group. The winners will be the much lower cost manufacturers in China, especially with the govt. there backstopping the industry.

2008 Dec 12 02:36 PM

[kris23:]

I don't know FSLR has been pretty hyped but it may be for good reason, although there has been some risk of oversupply in this industry as of late. Sentiment was pretty bullish (predictwallstreet.com/...) but is beginning to fall. I think alt.energy has sort of taken a backseat right now as the economy needs to become a little more stable for people to want to highly invest in this industry again.

2008 Dec 12 03:44 PM

[Douglas Hvi...:]

This time of economic contraction might be a good chance to build some personal infrastructure, such as a solar hot water system also powered by solar. Sometimes our best investment is a "reality" investment. Of course, you must do your homework, or you are speculating, rather than investing.

2008 Dec 13 08:37 PM

[User 323295:]

Hi Jonathan

I read your article about the FSLR inventory, and price target! (See below)

Since then FSLR went from $111.00 to $148.00 and now leveled off at $140.00.

I was wondering if anything changed since then, that would justify it's current price!

Please let me know.

Thanks

Sam

2008 Dec 20 10:57 AM