Pacific Crest’s Mark Bachman Raises Target on First Solar (Nasdaq:FSLR) - Maintains Outperform

Apr 09, 2009
Author: SCP Editor

April 9, 2009 – Analyst Comments – Pacific Crest’s Mark Bachman issued a note on First Solar (Nasdaq:FSLR) this morning, raising revenue and EPS estimates, as well as his price target from $209 to $227, which is 25x his 2010EPS expectations of $9.09. Bachman maintained his OUTPERFORM rating.

Key Takeaways:

·         Updated model to include the Optisolar transaction, which closed on Friday, as well as lower contract ASPs through 2010, and several other factors. He factored in an acceleration in cost-per-watt, driven by the Malaysian operation where the remaining eight production lines are ramping.  Despite ASP erosion, he expects profitability to improve as manufacturing costs come down;

·         “ASP declines represent an offensive weapon, not a defensive tactic.” Bachman is forecasting gross margins above 50% throughout 2009;

·         Increasing FY09/10 revenue estimates to $1.93 billion and $2.5 billion, and 09/10 EPS estimates to $7.89 and $9.09.

·         Maintaining OUTPERFORM rating, and price target of $229, noting that the company’s growth trajectory, market-leading position and belief that it can deliver subsidy-independent electricity prices which are competitive with retail rates warrant a premium multiple of 25x FY10 EPS estimates.