Citi Reports Disappointing First Solar Results

According to Citi, First Solar FSLR maintains Hold rating for now. Citi said that by maintaining C2011 EPS guide but guiding CQ2 way below its/Street estimates, it's hard to see this as anything but a disappointing Q that creates a higher 2H risk profile. “While true, and lumpiness/ unpredictability of EPC business combined with stagnant non-US ground mount market and yet proven 30kw offering continue to argue for more multiple compression, we think valuation may be compelling moving through CQ2. Near term, the CQ2 miss was due to FSLR assuming the DOE loan guarantee for 290MW Agua Caliente doesn't close until CQ3 (likely trigger ~$200-300MM revs) while still an outside chance it happens in CQ2. Additionally, it now has more of the >$2.00/W module ASP embedded in this project to offset the pricing impact of more draconian ground-mount FiTs in Italy/Germany which should mostly impact CQ3. The key question is whether there is big financing available beyond the government for large projects like AV Solar Ranch, Sunlight, and Topaz and the filing on the detailed Total/SPWR negotiations would suggest there are partners. These projects are of utmost importance because we think they all embed module ASP of at least $1.90/W, way above merchant pricing that is probably going to fall to ~$1.25/W in 2012 and akin to a “time capsule” of what pricing looked like 18-24mos ago when the PPAs were negotiated. C2011 EPS tweaked just slightly lower from $10.17 to $10.12 and C2012 from $12.43 to $12.31 (Street $10.91). Maintain Hold, $150 target on 15x average C2011/2012 EPS.” First Solar closed yesterday at $134.66.