Axiom Previews Earnings From First Solar (FSLR)

Axiom Capital Research is out with a research report on First Solar FSLR, as it previews the company's earnings report. It has a Sell rating and a $69.96 price target on shares. In a note to investors, Axiom writes, "While the CY11 bull thesis on FSLR is predicated on the company's “captive” North American pipeline buffering any loss from merchant European business, we believe this view is misplaced, implying risk to CY11 ests: In recent discussions with a number of FSLR's largest customers, we have learned that, similar to C1Q11, C2Q11 orders have been pushed-out to C3Q11 (creating risk to C2Q11 Street ests). However, contrasting our discussions with FSLR's customers last qtr, in more recent conversations we have learned that a number of the company's largest partners are now in the process of canceling orders (implying risk to back-end loaded CY11 guidance). Additionally, as shown in Figure 1 below, when considering Colexon has explicitly stated that it has renegotiated its agreement (i.e., both pricing and quantities) with FSLR to take 65% more volume in CY11 vs. CY10, originally announced 8/27/10 (see Figure 4 below), we see outsized risk to both C2Q11 & CY11 consensus EPS estimates for FSLR. While we have adjusted our C1Q10/C2Q10/CY11 EPS ests slightly higher to $1.13/$1.28/$4.66, vs. $1.12/$1.21/$4.16 prior (Street $1.15/$2.00/$9.44), to reflect a more favorable €/$ exchange rate, we see significant risk to C2Q11/CY11 ests; we do not believe this risk to FSLR's CY11 fundamentals is well understood by the Street at present, implying risk of multiple contraction on the horizon. Based on our new CY11 EPS est of $4.66, using our 15x forward P/E multiple, our 12-month price objective edges modestly higher to $69.96 vs. $62.36 prior." Shares of FSLR are off $3.53 today to trade at $134.00, a loss of 2.6%.