First Solar Beats on Q3 EPS but Cuts Sales Guidance, Triggering a Wave of Price-Target Cuts

FSLR reported third-quarter adjusted earnings of $5.30 per share, beating the $4.67 consensus by $0.63, but revenue fell 22.8% year over year to $1.23 billion, missing the $1.29 billion analysts expected. The company cut its full-year net sales guidance to $4.6-4.9 billion from $4.9-5.2 billion, putting the $4.75 billion midpoint about 5.7% below consensus, and trimmed expected volumes to 16-17 GW from 17-18.2 GW. It also announced a $500 million share buyback. Shares fell about 5% after hours and traded near $170.59 on Friday.

Analysts responded with a broad round of target cuts, mostly while keeping positive ratings. Wells Fargo lowered its target to $260 from $313 and Morgan Stanley to $307 from $326, both at Overweight. Needham cut to $236 from $303 with a Buy, BMO to $255 from $263 citing slower conversion of bookings to pricing, Susquehanna to $246 from $270, and Freedom Broker to $248 from $280, pointing to industry uncertainty from recent legislative initiatives. Bernstein, the most bearish, cut to $169 from $197 and kept Underperform. GLJ Research went further, downgrading to Hold with a $161 target on pricing concerns.

The debate centers on price. On the earnings call, management said it has raised pricing on deals still in early negotiation since the Section 232 announcement, with recent US bookings averaging about $0.36 per watt and a backlog of about 44 GW. GLJ notes the company has not yet signed a deal at the new price, and BMO argues the stock already prices in far less than recent bookings. Customers are also deferring early-stage procurement, which is part of why volumes were cut.

Even after Friday's cuts, our consensus data shows 27 of 36 rated analysts at Buy with an average target of $274.24, though that band may not yet reflect every revision. The next tests are whether higher pricing converts into signed bookings and whether the reduced guidance holds through year-end.