The reason for the upgrade to Outperform and the factors that make First Solar an attractive investment are delineated in a Raymond James report.
In a Feb. 24 research note, analyst Pavel Molchanov reported that Raymond James upgraded its rating on First Solar Inc. (FSLR:NYSE) to Outperform from Market Perform for the first time since 2010.
This is because cleantech is "red hot" and "the backdrop is the best all-around investor sentiment on cleantech in more than a decade," added Molchanov. For instance, already this year the Eco Index rose 27% and last year it increased 58%.
Molchanov described First Solar as being far from the most exciting cleantech story but in the commoditized module market, it is among the industry leaders. "This is one of the few remaining value ideas, arguably deep value, in cleantech," he commented, "and we think risk/reward is nicely tilted to the upside." First Solar manufactures thin film photovoltaic modules.
Here is what Arizona-based First Solar has going for it, according to Molchanov. It is the only U.S.-based supplier in the global Top 10. Of those, it is the only one without direct exposure to China. It is large scale, cost competitive and highly bankable.
Also, First Solar has a "sterling," cash abundant balance sheet. Though cash flow will likely still be negative this year, year-end net cash of $1.3–1.5 billion equals 25% of the energy company's current market cap. Further, cash outlay is dropping from its peak of $740 million in 2018; guidance for 2020 is $450–550 million. "The balance sheet certainly provides the financial flexibility to initiate buyback (or a dividend) for the first time ever," Molchanov highlighted.
Raymond James has a target price of $65 per share on First Solar, the stock of which is currently trading at around $45.83 per share.
Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures from Raymond James, First Solar Inc., February 24, 2020
ANALYST INFORMATION
Analysts Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination, including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.
The analyst Pavel Molchanov, primarily responsible for the preparation of this research report, attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
RAYMOND JAMES RELATIONSHIP DISCLOSURES
Certain affiliates of the RJ Group expect to receive or intend to seek compensation for investment banking services from all companies under research coverage within the next three months.
Raymond James & Associates, Inc. makes a market in the shares of First Solar, Inc.
Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available here.