NEW YORK ( TheStreet) -- Solar stocks are taking a breather after a big rally on Wednesday, and First Solar ( FSLR) even received a downgrade, based purely on valuation and the fact that the solar bellwether has run up to an 18-month high share price.

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On Thursday, Auriga Securities downgraded First Solar to a hold, and said in its downgrade that it did not intend to be a solar "rally killer," but with First Solar already the premium-priced stock in the sector, and its shares ending Wednesday above the $164 mark, a pause was prudent.

Auriga's price target remains $167 on First Solar. The recent Goldman Sachs upgrade of First Solar with a price target of $165, and the addition of First Solar to Goldman's conviction buy list, were often cited in the recent rally in First Solar shares and the solar sector more broadly.

TheStreet has previously noted that First Solar shares have traded in a predictable pattern over the past year and a half, and at these levels, a pullback would be suggested by the charts. On the other hand, the 18-month high that First Solar reached on Wednesday was a "break-out" above the established trading range, in the least poking a minor hole in the chart trading approach to First Solar.

First Solar has benefited from another trading chart as well -- its well-established link to oil prices. As oil rises, so does First Solar, and with the recent unrest in Egypt and the rising price of oil, it's been a good trading chart for First Solar.

The Auriga analyst, though, leaves aside the chart trading noise and makes the straightforward case that a downgrade of First Solar from buy to hold is merited because it's not possible to raise earnings estimates further.

"The current share price of FSLR is within 2% of our target and is trading at 17.4x our 2011 EPS and 14.7x our 2012 EPS. In our discussions with investors, lobbying for earnings multiples above 15x are easily ignored, thus we find it prudent to lower our rating following the recent run," the Auriga analyst wrote on Thursday.

The analyst stressed that there was "nothing sinister" about the First Solar downgrade, and said its 15x multiple for First Solar is a premium in the sector -- its favored Chinese solar stocks trade at 10x. With its 2012 model already issued for First Solar, Auriga said it was "ahead of the curve" in regards to earnings forecasts, and the model mandates a downgrade to hold.

First Solar shares were down 2.5% on Thursday, as solar stocks pulled back after the big Wednesday rally.

There was a big U.S. solar project win for Chinese solar company Suntech Power ( STP) on Thursday, that could arguablY be read as a negative headline for First Solar, though the Auriga analyst did not hold that view, and his downgrade was not related to Sempra Energy's awarding of a 150 megawatt U.S. project to Suntech.

-- Written by Eric Rosenbaum from New York.

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