Recent IPO First Solar is Overvalued Relative To Its Peers

First Solar Inc. (FSLR) shot up 6.31% yesterday to end the session at $28.81. The company is a recent IPO and has performed very well up to now. The stock is up 44.1% since its IPO date of 11/17/2006.

Lets look at the analyst coverage as of yesterday:

• Piper Jaffray initiated coverage at ‘Outperform’ with a $37 price.
• First Albany initiated at ‘Buy’ with a $36 price.
• ThinkEquity initiated at ‘Buy’ with a $35 price.
• Morgan Stanley initiated coverage with an ‘equal weight’ rating and a $28 price target.
• Credit Suisse initiated coverage with ‘outperform’ rating and a $32 price target.

Except for Morgan Stanley, everyone seems to be impressed with First Solar. I wonder why?

IPO Underwriters

• Credit Suisse: Joint Lead Manager
• Morgan Stanley: Joint Lead Manager
• Piper Jaffray: Co Manager
• Cowen & Co: Co Manager
• First Albany: Co Manager
• ThinkEquity Partners: Co Manager

First Solar Inc. (FSLR) quarter ended April 1, 2006

• Revenue: $13.62 Million
• Net Loss: $5.9 Million
• Market Cap: $2 Billion

Evergreen Solar (ESLR) third quarter ended September 30, 2006

• Revenue: $36.2 Million
• Net Loss: 5.6 Million
• Market Cap: $519 Million

SunPower Corp. (SPWR) third quarter ended September 30, 2006

• Revenue: $65.3 Million
• Net Income: $9.6 Million
• Market Cap: $2.5 Billion

I don’t think a $2 Billion market cap is justified for First Solar Inc. and I am going to look to short it.

FSLR 2-month chart:

Disclosure: at the time this article was published, author didn’t have any positions in the above mentioned stocks.