Laudani: Cautious Optimism on First Solar

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I don't attend many analysts meetings. Usually they are a big waste of time for a busy guy. But that doesn't mean I don't try to game the meeting ahead of time. First Solar (FSLR) holds its annual analyst meeting on Wednesday March 19 and I am cautiously optimistic. If the company can halt its margin decline, investors will see the light.

Just three weeks ago, First Solar reported a lousy fiscal 2013 fourth quarter and guided down the first quarter. For the quarter, revenue fell 28.6% to $768 million vs. a Street estimate of $976 million. (Total stinker!) Management blamed the miss on confusing revenue recognition policies. (Whatever)

But what really burned investors was the lowered first quarter guidance. I don't think anyone expected the company to forecast revenue between $800 million and $900 million. Investors were expecting revenue north of $905 million. The stock dropped 13% on the news.

Normally, after that kind of earnings report, I'd skip the analyst meeting. After all, who wants to sit through a bunch of depressing slides while management tries to explain away the last two quarters? And for all that listening and note taking, you only get is a chicken sandwich and a cookie.

For the stock to head significantly higher, the company has to get a handle on its gross margin. Gross margin has totally collapsed. In the last five years, gross margin is down 48%. In fiscal 2009, the company sported a 50.56% gross margin.

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