First Solar Earnings Get Valuation Check (FSLR, TAN, KWT, ENER)

First Solar is roughly 11% of the key solar ETF in the Claymore/MAC Global Solar Energy (NYSE: TAN), and that is down 3.7% at $8.32 in the after-hours session.  The Market Vectors Solar Energy ETF (NYSE: KWT) is much thinner in trading volume and is indicated lower without much volume, but First Solar is about 8.6% of its weighting.  Many have hoped for a recovery in Energy Conversion Devices, Inc. (NASDAQ: ENER), but that is down almost 4% at $11.02 in the after-hours session and that is on the heels of a 4.5% drop during the normal trading session.

The solar leader issued guidance that is very disappointing to many of the solar bulls.  Q4 revenue guidance is $550 million to $600 million vs. $534.48 million expected by Thomson Reuters.  The new 2009 revenue range is $1.975 billion to $2.025 billion.  That is at the higher-end of a prior target from the company and just meets a $2.00 billion Thomson Reuters consensus target at the mid-point.

There are other negatives here.  The company says that its module pricing for 2010 is unclear and it still sees a potential change for solar business in Germany in 2010.  Also noted was Ontario requiring significant local content.

The company has a new CEO, Robert Gillette.  None of today’s woes are Mr. Gillette’s fault nor his problem.  He is taking over after years of unfettered growth and at a time when industry margins are contracting and as sector orders are getting more and more competitive.

It is very possible that tomorrow’s trading will be different than the after-hours session today after analysts and traders break these numbers down with the full impact.  But this trades now at over 6-times expected revenues and trades at roughly 20-times 2009 earnings.  At least that was before the near-15% drop to $129.00 in the after-hours session.

JON C. OGG
OCTOBER 28, 2009