NEW YORK ( TheStreet) -- You might think after First Solar ( FSLR) shed 75% of its value, ousted its CEO, and was the biggest loser in the S&P 500 in 2011, that things couldn't get any worse. But they can get just a little bit worse for the U.S. solar company, according to Axiom Capital analyst Gordon Johnson. Johnson, whose bear call on First Solar shares was highlighted by CNBC recently as one of 2011's best shorts, still sees downside to $26 in First Solar stock. In a note released on Thursday morning, Johnson isn't backing away from his short on First Solar, but said the downside is a lot less than it used to be. In what must have been a bittersweet sentence to write for an analyst who in the end was proven to be (very profitably) right about the biggest solar short in history, Johnson wrote, "We recognize the short case has nearly run its course." Solar watchers have been anticipating Johnson's note on First Solar ever since the company released its earnings outlook in December. Solar investors have been curious to see whether the most noted First Solar bear on Wall Street is still bearish. Some bears have gotten skittish on First Solar with the prospect of a takeover by a larger company like General Electric ( GE). Some investors are also skeptical that the cautious guidance released by new interim First Solar CEO and First Solar founder Michael Ahearn is intended to set the bar so low that First Solar beats estimates -- First Solar's annual guidance was at half the level of the Wall Street consensus. To the contrary, Johnson predicts a loss in the third quarter of 2012. "With our model implying FSLR's component modules business will begin losing money in 4Q11, with losses in both 2012 & 2013, & our work implying FSLR will start a utility project every quarter in 2012 except 3Q12 - we believe FSLR pulls in ~15% of aggregated full-life project revenue into the first quarter it begins the projects via %-of-completion accounting (i.e., upfront development fee), allowing the company to exclude the offsetting costs - we see an earnings loss as highly probable in 3Q12." In short , the module business is going away as a source of earnings and that means First Solar becomes valued on the cash flow it can generate from its project business and Johnson argued that "FSLR's 2015 roadmap suggests they can earn roughly $3.00/share by 2015, and using a 10x multiple suggests a fair value today of roughly $30/ share. To reflect this trend, Johnson is changing his model for the once high-flying growth stock to a discounted cash flow model, "as we believe there is no value in FSLR's core business, rendering the company's near-term ability to generate cash as the key metric in assessing any value." Also, the First Solar guidance assumes everything goes as planned, and given the gyrations in the solar sector that's a big assumption to make in the near-term and that leads Johnson to a negative short-term bias from its current share price of $34.51. Its 52-week low is $29.87. Johnson also notes that even in the longer-term outlook based on First Solar being successful in the EPC (engineering, procurement and construction) business of large-scale solar projects, the company's 2015 $3 EPS scenario assumes EPC prices of $1.40-$1.50/watt. "We believe excess capacity (driven by competition from Chinese vendors) will likely drive EPC prices below $1.50/watt by 2012. While we do not believe this math is well understood by the Street at present, as prices continue to fall through 2012, & this dynamic resonates with investors, we do not believe the 'buy-side' will be willing to pay more than 8x for FSLR's projected 2015 earnings of ~$3.00/share." After its 75% decline in 2011 and the colossal drop from its all-time high of $300, it might seem like any downside is minor in First Solar shares. As Johnson said himself, the short has nearly run its course -- and he says it's hard to argue with any short who wants to cover at this point -- but at $34.51 on Thursday morning, there's still 25% downside in First Solar shares implied by his $26 price target. Shares were up 2% on average volume Thursday after having retreated by 4% a day earlier. -- Written by Eric Rosenbaum from New York.