Goldman Downgrades First Solar To Sell Despite Positive Stance On Industry

The solar industry has several encouraging catalysts ahead, including attractive financing conditions and renewed policy support. The thesis apparently doesn't apply equally to all companies, however, as Goldman Sachs turned bearish on First Solar, Inc. FSLR.

The First Solar Analyst: Brian Lee downgraded First Solar's stock from Buy to Sell with a price target lowered from $101 to $81.

The First Solar Thesis: Despite a bullish stance on the solar industry, First Solar's gross margins and earnings per share are likely to peak by the middle of 2021, Lee wrote in the note. In fact, EPS peaked in 2020 and will decline at a 17% compounded annual growth rate through 2022. Over the same time period, First Solar's peers will benefit from a 20% to 30% earnings growth profile.

Related Link: Barclays Downgrades First Solar As Tariff Tailwinds Subside

Looking forward to 2022, Lee said First Solar's module average selling price (ASP) will "sharply" decline due to the expiration of Section 201. The pace of ASP decline could be worse than currently expected due to the large amount of new module capacity that will come to the market over the next one to two years.

The research firm's revised $81 price target implies around 20% downside and is based on an ex-cash P/E multiple of 22 times which is "fair" given the company's lack of earnings growth.

FSLR Price Action: Shares of First Solar were trading lower by 6.3% Tuesday morning at $94.78