Lazard More Bullish on First Solar & Capstone Turbine (FSLR, CPST)

Analyst Sanjay Shrestha of Lazard Capital Markets is sticking with his Buy ratings this morning on shares of First Solar (NASDAQ:FSLR) and Capstone Turbine (NASDAQ:CPST).

On First Solar (NASDAQ:FSLR):

• We maintain our BUY rating on First Solar shares following the company’s analyst day and tour of the company’s Perrysburg, Ohio, manufacturing facility…. elaborated on its overall strategy to garner leading and defendable market share in the mainstream electric power generating market, without subsidy, while maintaining a superior return on capital through people, processes, technological leadership, scale, strong financial discipline, and risk control….. reiterated its cost-reduction goal of achieving module ASP of $1-$1.25/watt by 2010-2012.
• Shrestha adds, "We believe this strategy will allow First Solar to successfully migrate from subsidized markets, to renewable energy markets, to mainstream electric power markets over the next several years…. We are raising our price target to $250 from $225. Our new target equates to a 40x multiple on our 2010E EPS of $7.25 (up from $6.50), discounted back 15% for one year.

On Capstone Turbine (NASDAQ: CPST):

• Interestingly enough, an approval for microturbine technology to become a standard in New York is the basis for todays call.  Mayor Michael Bloomberg announced a new rule setting the country’s first standard for use and installation of microturbine systems in residential and commercial buildings. The rule creates a standard protocol for microturbine installation in NYC…
• Shrestha notes, "Given Capstone’s UL certification and strong presence in Northeast market, we would look for increasing order traction; however, we note that sales cycles for distributed generation solutions remain lumpy/lengthy…. We maintain our $2.50 price target, which reflects a 25x multiple on our 2012 EPS estimate of $0.20 discounted back at 25% for three years.  We maintain our $2.50 price target, which reflects a 25x multiple on our 2012 EPS estimate of $0.20 discounted back at 25% for three years."

We recently noted in our own "10 Stocks Under $10 Newsletter" how after we reviewed Capstone Turbine (NASDAQ:CPST) that we felt his call for a double in the shares could be greatly understated if you track alternative energy and historical stock prices compared to modern and past valuations.

• Capstone Turbine (NASDAQ: CPST) shares are up 6% at $1.22 today; 52-week trading range is $0.75 to $1.48 (stock was above $5.00 in 2005 and traded well over $50.00 back in 2000); market cap $177.5 million.
• First Solar (NASDAQ: FSLR) shares are up over 4% more today at $223.85; 52-week trading range is $26.40 to $252.39; market cap now $17.4 Billion.

Jon C. Ogg
December 5, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.