Yesterday, First Solar (FSLR) announced a 73 megawatt manufacturing capacity expansion at its Ohio plant, a large increase over the current capacity of 119MW. However, FBR used this announcement to reiterate its UNDERPERFORM rating and $210 target and once again pee on FSLR's US prospects:
We find last night's announcement that FSLR will add a total increment of 73MW of capacity to its existing facilities in Ohio by mid CY10 to be another indication that "utility scale" projects, in our view, will not take off for some time, unless PPA [power purchase agreement] terms...and/or system ASPs.. are made more accommodating to the utility industry.
Although the bulls on FSLR are expected to use this capacity-expansion announcement as an indication (again false, in our opinion) that the utility market is just around the corner, the fact that this capacity increase will not even be completed until mid 2010 speaks volumes to us!
FBR also sees problems in the recent resurrection of the US dollar, which will damage FSLR's bottom line:
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Additionally, we would like to use this opportunity to highlight the downside risk to the consensus EPS estimates from the appreciating U.S. dollar since, over the past several quarters, a favorable exchange rate (or a depreciating dollar) has been one of the driving factors behind the "beat and raise" in every quarterly report.
One thing for certain: we view FSLR's management as one of the best in the industry in terms of execution, foresight, and strategy; but that, by itself, has already driven a premium for the stock over the peer group, as FSLR currently trades at 10x EV/sales and 28x EV/EBITDA vs. the peer group average of 3x and 15x, respectively. And, with expectations as well as CY09/CY10 consensus estimates still too high, in our opinion, we encourage profit taking towards our price target of $210, or 23x estimated '09 EV/EBITDA.
FBR reiterates UNDERPERFORM on First Solar (FSLR), target $210.
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