First Solar Shares Jump on Earnings News and Analysis

Photovoltaic solar energy solutions provider First Solar's  (FSLR)  shares rose 13% to $34.27 Wednesday after the company suggested it may be moving closer to settling a legal case and it upped its outlook for sales and margins.

The legal matter involves a lawsuit in which Suniva, a First Solar rival, has petitioned the International trade commission to hike a tariff on solar panels imported to the U.S, which is what First Solar does. 

Axiom analyst Gordon Johnson II told clients in a Wednesday research note that, "Assuming Suniva's petition for a minimum price on US solar module imports is compromised at 56 cents per watt, the valuation on FSLR applied by the market, we believe, could approach $76 a share." Working through the math, Johnson concluded that, "Thus, risk-adjusted, it seems, near-term, FSLR's stock could be headed toward $43/shr (or, 30% upside from where it's trading at pre-market on May 3."

Late Tuesday the firm said that it earned $891 million, or 9 cents a share, compare to an expected loss of $693 million, or 13 cents a share.

"The upside in the quarter, we believe, emanated primarily from the sale of FSLR's 250MW Moapa project, where 100% of the revenue was recognized, as well as, to a much lesser extent, the timing on settlement income from a customer. In fact, excluding the Moapa sale, we calculate FSLR's 1Q17 EPS would have come in closer to a 23 cents a share loss, or a sizeable miss vs. Consensus - suggesting an inflection point in earnings is not "on tap""

First Solar raised its sales guidance $50 million and upped its expected 2017 gross margin outlook by 1.5% due to an accounting change.

"With respect to guidance," Gordon wrote, "When taken all in, 2017 EPS was guided 48 cents higher, or to 5 cents, vs. Consensus 29 cents."

Earlier this week JPM Securities rather presciently upgraded the shares to "market perform" from "market underperform" noted that being short First Solar in the coming quarter "was not wise" and that it expected the market to spend the coming months pricing in a near-zero possibility scenario that would result in First Solar in sole possession of the U.S. utility scale solar power plant market.

Bruce Kamich, who does technical analysis for The Street's sister publication Real Money, is not convinced the stock's in a good place. In late April he wrote, "First Solar may be in a promising industry with a lot of "potential, " but the charts of FSLR are still pointed down and suggest that the bears remain in control. Let's visit with the latest charts and indicators to see if there any green shoots of a turnaround on the charts." 

(What will move markets this quarter and how should investors position themselves ahead of time? Jim Cramer sat down with four of TheStreet's top columnists recently to get their views. Click here to listen to his latest Trading Strategies roundtable with them and read their advice for stocks, bonds, forex and gold.)

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