3 Reasons Wells Fargo Is Warming Up To First Solar

Wells Fargo raised its valuation range on First Solar, Inc. (NASDAQ: FSLR) despite the solar energy company reported a hefty fourth-quarter loss amid falling revenues.

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The impact of loss is such that investors have ignored the adjusted EPS beat and outlook raise:

• First Solar reports Q4 adjusted EPS $1.24 versus $0.97 estimated.
• Revenue $480 million versus $412 million estimated.
• First Solar reports Q4 loss of $719.9 million, or $6.92 per share.
• First Solar records pre-tax charges of $729 million in Q4.
• First Solar raises FY 2017 revenue outlook from $2.5 billion–$2.6 billion to $2.8 billion–$2.9 billion, EPS $0.00–$0.50 versus $0.41 estimated.

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Despite maintaining a Market Perform rating, analyst Glen Pruitt raised his valuation range on the stock to $35 to $36 from $28 to $29 as he is increasingly positive on company’s prospects following transition to the larger Series 6 (S6) configuration from Series 4 (S4).

Reasons To Like First Solar

“We are attracted to FSLR's (1) innovative manufacturing process, (2) conservative balance sheet and (3) execution on strategic plans,” Pruitt wrote in a note.

Though Pruitt is positive on the secular trend toward renewables and the company’s strong balance sheet, the near-term headwinds of oversupply and lack of backing from Trump for renewables still persists. The analyst’s neutral stance on the First Solar also assumes risks associated with S6 transition.

“We remain on the sidelines as we believe the substantial near-term issues offset the longer-term positives, particularly while the industry adjusts to the new supply-demand dynamics,” Pruitt added.

As such, the analyst maintained his 2017 EPS estimate of $0.25, but cut his 2018 EPS view to $0.50 from $1.

At last check, shares of First Solar fell 8 percent to $33.68.