Monday, November 1, 2010

Citigroup (NYSE:C), Deutsche (NYSE:DB), Auriga, Macquarie Give First Solar

First Solar (Nasdaq:FSLR) has garnered a lot of attention since their most recent quarterly report, drawing mixed rating results from Citigroup (NYSE:C), Deutsche Bank (NYSE:DB), Auriga and Macquarie.

The good news from their recent report was earnings per share exceeded analysts' expectations, with normalized EPS coming in at $2.21, although excluding one-time items, the company earned $1.87 a share, missing the analyst estimate of $1.94 per share, which is what most were looking at.

The bad news is cost rose during the quarter, generating questions as to if the industry cost leader is experiencing sustainable cost challenges, or they can rein it back in.

First Solar had their average cost per watt increase to 77 cents, a boost of 1 cent. That was based upon focusing on improving production lines, which ended up slowing things down.

Chief Executive Officer Rob Gillette said in the conference call of the company that they're working on reducing costs as production capacity is poised to double in 2012.

Again, cost performance going forward, and thus margins and earnings, will be determined on whether this was specific to the quarter, or a long-term
reality. No one knows at this time which it is. It generated concerns because it's the first time since the second quarter of 2008 the cost-per-watt increased sequentially.

Auriga said, "Core cost per watt increased slightly due to manufacturing
changes made in the quarter. While this is likely a one-time event, it does mark the first time since 2Q08 that cost-per-watt increased sequentially. With increased q/q utilization and module efficiency, concern might arise that cost reduction efforts are at least stalling."

Auriga maintained their "Buy" rating and $175 price target on First Solar.

Citigroup increased their price target on First Solar from $145 to $150,
although they are much lower than the other price targets mentioned here.

Macquarie downgraded First Solar from "Buy" to "Neutral," and Deutsche Bank downgraded them from "Buy" to "Hold." Macquarie has a price target of $175 on the solar company, raising it from $170.


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