This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Solar stocks have been in freefall since last peaking in the Spring. There was some lingering hope that demand would pick up in the fourth quarter as companies rushed to take advantage of fading subsidies, but Specialized Technology Resources, or STR Holdings, Inc. (STRI), likely squashed those hopes with an earnings warning on the evening of October 17th. STRI held firm on its revenue guidance but shaved its earnings guidance by 6-17% and withdrew annual guidance. Most damaging is the company’s assessment of the current market and confirmation of deteriorating conditions:
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The most influential warning may come from First Solar (FSLR). {snip}
Source for all charts: FreeStockCharts.com
At this point in a price collapse, I would normally think an earnings warning would be a major relief and generate a potentially large relief rally. Just last week (Oct 12th), Ticonderoga issued the lowest price target I have yet seen on FSLR at $40 over the next 12 months. Negativity seems to have reached its highest of heights. However, there are still 12 strong buys and 11 buys on FSLR out of a total of 42 analyst recommendations. In other words, there remains plenty of room for more negativity. An earnings warning may release a lot of pent-up downgrades that will send the stock reeling, not rallying, in the immediate aftermath.
{snip} While I made some good calls in the solar space earlier this year, I essentially give myself a big, fat “F” for failing to fully absorb the implications of a coming slowdown in the solar industry. When I noted the high likelihood of a slowdown, I chose to focus on near-term buying opportunities rather than to map fully the potential downside scenarios. {snip} My new price targets on FSLR adopt the analysis from Aaron Chew at Maxim Group. Chew has graciously granted me permission to reference his September 26th upgrade from sell to hold with an estimated trading range from $55-80/share…
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I realize that FSLR insiders were buying sizable amounts of shares at much higher prices in late August, around $90/share, so it seems that FSLR’s 1-2 year upside potential should be much higher than Chew’s upper range. However, I think it makes sense to maintain a muted and low expectation on FSLR, and the rest of the solar industry, until some positive catalysts begin to emerge again. {snip}
Be careful out there!
This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Full disclosure: long FSLR shares, calls, and puts; long GTAT shares
Do you see aby upside to FSLR. I am down 70% on this stock . All these loan garantees should have helped this stock They seem to get unfair beating from the analysts. It is the industry not the stock
I am also long the stock. I do see a LOT of upside but perhaps not for a year or more at this rate. The industry is very depressed right now and the market doesn’t care about the loan guarantees unless they are lost. The industry needs a major catalyst, like the price of coal skyrocketing. Otherwise, FSLR will continue its steady progress to making electricity cheap enough where it won’t need subsidies in more and more markets. I would recommend on the next rally in the stock, buying a little protection.