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First Solar Double Downgraded to Sell by Goldman Sachs

First Solar's earnings and revenue have 'already peaked for this cycle,' a Goldman Sachs analyst says.
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First Solar  (FSLR) - Get First Solar Inc. Report was double-downgraded to sell from buy on Monday night by a Goldman Sachs analyst who believes the solar energy company's earnings and revenue have "already peaked for this cycle."

Shares of the Tempe, Arizona-based company were tumbling nearly 6% to $95.24 at last check.

Goldman Sachs analyst Brian Lee also slashed his price target on First Solar to $81, down from $101,

"FSLR's earnings and revenue have already peaked for this cycle, and we expect FSLR's gross margins to similarly peak in 1H21 as near-term reductions are offset by pricing declines ahead of Section 201 tariff expiration," Lee said in an investors' note. 

Bifacial solar panels are no longer exempt from Section 201 tariffs after a new United States Court of International Trade ruling. 

Lee said that First Solar significantly benefited from high pricing modules in the U.S. over the past few years due to Section 201 tariff concerns.

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Looking ahead, Lee continued, "we believe EPS declines starting in 2022 will be further exacerbated by weaker industry pricing moving through next year, as we see the supply-demand dynamic in modules as one of the most challenged areas of the supply chain in the near-to-medium term."

Lee said that while First Solar did not provide any updates on its ongoing strategic review for its systems business on its third-quarter call, "the company noted that it is out to the market exploring options."

"While we take no view on the likelihood of any outcome from the company's strategic review," he said, "we update our prior valuation analysis of the business unit, which we think we could serve as a positive catalyst." 

Lee advised investors to stay positive on the solar energy sector, but to be more selective. 

He said that he remained positive on solar equities heading into 2021 "given ongoing secular growth amidst renewed policy support and attractive financing conditions, while leverage to emerging high-growth verticals like battery storage adds scarcity value to certain pockets of the group as well."

Separately on Monday, JMP Securities analyst Joseph Osha raised his price target on First Solar to $135 from $100 and keeps an outperform rating, according to the Fly. The analyst said  extensions for the Investment Tax Credit and Production Tax Credit have been anticipated as "early priorities" for the Biden administration.