Shares of First Solar were gaining 13.9% to $56.53 in morning trading.
Deutsche Bank analyst Vishal Shah said the upgrade and price target increase were due to First Solar's statement that it is close to forming a joint YieldCo with SunPower (SPWR) . The two companies made the announcement Monday afternoon, but have not yet finalized a formation agreement.
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Deutsche Bank also initiated coverage of SunPower with a "buy" rating and a price target of $43.
Shah said a joint YieldCo "is probably the best strategy for both companies, in our view. This decision not only makes the potential yieldco one of the best growth stories out there, but it also offers the entity strong development capability in utility scale/commercial mkts."
"This announcement, although unexpected, is a significant positive in our view," Shah continued. "While SPWR had discussed plans to announce a yieldco by early this year during their Analyst day, shares were clearly not discounting any upside potential from this yieldco."
Shares of SunPower were gaining 16.7% to $32.45 in morning trading.
TheStreet Ratings team rates FIRST SOLAR INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FIRST SOLAR INC (FSLR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FSLR's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, FSLR has a quick ratio of 2.15, which demonstrates the ability of the company to cover short-term liquidity needs.
- The revenue fell significantly faster than the industry average of 10.1%. Since the same quarter one year prior, revenues fell by 29.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to -$47.21 million or 112.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, FIRST SOLAR INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: FSLR Ratings Report