A Shadow of its Former Self - First Solar
First solar, the solar company headquartered in Tempe Arizona, has seen its stock drop by 7% this year, and is down nearly 60% in the last year.
Today, it appears the stock is down because of a report by JMP Securities, which cut its price target from $31 to $25. However, other research firms raised their targets recently.
First solar earned $5.17 in non-GAAP EPS in 2017, but it lost $3.48 a share in GAAP earnings, which includes restructuring and impairment costs. Investors may be worried about the 2017 forecast, in which FSLR forecasts a near break even EPS, in terms of non-GAAP and a loss in terms of GAAP.
The outlook for solar has been tempered as many fear the election of Trump could also bring in the cancellation of tax credits . Others may be concerned about First Solar's entrance into the yield Co space with the company 8Point3, the joint yieldco formed by First Solar and SunPower Corporation in 2015 to own and operate a portfolio of selected solar generation assets.
Many investors are well aware of Sunedison which declared bankruptcy last year in part because of its yieldco structure. The issue with yield co's is that the company while appearing to do well because it is recognizing sales to yieldco, an outside entity, FSLR owns only 28% of 8point3 less than the 50 percent typically required for consolidation, may make decisions based on its ability to sell future projects to yieldco; if the ability to raise debt for 8Point3, the yieldco, changes then it's possible FSLR can't offload a project which puts them in financial strain. FSLR had avoided the yieldco sector for a much longer period of time than other competitors. The model fell out of favor after the collapse in oil and natural gas prices, which provide a similar, tax-advantaged financing mechanism.