First Solar's on Fire; Is it Time to Buy?

NEW YORK (TheStreet) -- Shares of First Solar (FSLR) sizzled Wednesday, gaining more than 20%. Shares are logging more gains early in Thursday's session.

Shares began gaining early in Wednesday's session, but active traders certainly could have caught at the least a significant part of the days gains. Shares opened at less than $60, shot up to $64 by roughly 10:00 a.m. EDT and then trended higher throughout the day, closing at $69.40. The stock was recently changing hands at about $70.26.

The catalyst was First Solar's announcement of positive forward guidance -- but not just for 2014. The company issued guidance for the next three years, and the estimates were enough to boost investor sentiment. 

Investors had underestimated the company's prospects, and that's why the stock ripped 20% higher Wednesday and is gaining on Thursday.

So if you don't already own First Solar, what are you to do? Surely it's never a good idea to buy a stock that's up 20% in one day. At the same time, this new guidance means that shares were undervalued previously. 

Personally, I would never try and chase a move like this. It's too drastic. In November, the stock topped out at $65, and despite the current strength early Thursday, maybe it will find resistance in the low $70s in the next week or so. 

Prospective buyers may also get a hand if the broader market pulls back a bit in the next few weeks and drags First Solar down with it. 

I would think that the previous top near $65 would be a great place to initiate a long position. Obviously, lower would be nicer, but I doubt we're going to see shares in the low $60s anytime soon. 

For 2014, the company guided for earnings per share of $2.20 to $2.60, on revenue of $3.7 billion to $4 billion. According to Yahoo! Finance, analysts were looking for EPS of $3.21 on sales of $3.77 billion.

Although earnings per share will likely be lower than they had expected for the year, analysts' sales prediction is now at the lower end of the company's range. That's bullish, especially in an environment where investors are craving top-line growth. 

For 2015, the company expects to earn $4.50 to $6.00 per share on sales of $3.8 billion to $4.3 billion. Analysts had expected revenues of $4.25 billion, which is a good estimate, but they had only expected the company to earn $3.68 per share. That EPS estimate is now so low that it doesn't even fit into the company's range! In fact, the estimate would need to increase more than 22% just to come in at the low end of the company's range.

You can view the full Webcast here, for more details from the company: 2014 analyst meeting

When the Street is wrong, stocks move violently. These numbers are certainly bullish from First Solar, but if you want to be long, I'd recommend using caution as you try to get in. Wait for a pullback, or at least for the stock to settle down.

-- Written by Bret Kenwell in Petoskey, Mich.

At the time of publication, Kenwell had no positions in any stock mentioned. 

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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