First Solar (FSLR) has made a good recovery from the selling following February’s earnings report. Two weeks ago, FSLR closed as high as 9% above its price before its previous earnings and completed a 40% run-up from February’s bottom. The recent highs also marked the post-earnings highs from October’s poorly received earnings report. The stock now sits just above that price as it straddles the 200-day moving average. See the chart below:
*Chart created using TeleChart:
During this run, analysts have become slightly more bearish on FSLR. While the mean recommendation out of 36 ratings remains a hold, 3 analysts have downgraded from strong buy recommendations and 3 analysts have newly rated FSLR a strong sell. The put/call ratio sits near the top of its 12-month range and has spiked 36% higher in the last month. Sentiment would be even more bearish than the last round of earnings, except, interestingly enough, shorts have dropped 14% from 16.8M shares to 14.5M as of April 15. Of course, it is possible that shorts have switched to less risky bets through options. Regardless, there is still a lot of fuel here for forced buying.
The most interesting event since last earnings was significant insider buying in late February that neatly marked a bottom in the stock. That event turned me firmly bullish on FSLR shares. It motivated me to hold on through most of the post-earnings recovery and more than recover losses from February’s bullish earnings play.
I remain bullish going into Wednesday night’s earnings report and started scaling into a new position today. Standard & Poor’s downgrade of Greek debt to junk status created a buying opportunity, but it also created a strong excuse and backdrop for sellers to step in at the slightest blemish in FSLR’s earnings. Assuming FSLR does not reveal anything particularly devastating (a lot of speculation after February’s earnings that FSLR would be forced to take down guidance for the second half of the year – the insider buying makes me doubt that will happen), I expect to take advantage of further volatility by buying the dips. The overall trading target on FSLR remains a close of the October gap around $150.
Be careful out there!
Full disclosure: long FSLR