First Solar Struggles as Trade War Boils in Industry

October 24th, 2011 by Trefis Team
-17.29%
Downside
196
Market
162
Trefis
FSLR: First Solar logo
FSLR
First Solar

First Solar (NASDAR:FSLR) shares fell from their last week on the weakened outlook for the sector. Goldman Sachs cut its 6 month price target for the stock from $150 to $90 on the back of declining sales and lower module prices as a 2nd half recovery becomes an increasingly remote possibility. [1]

See our full analysis of First Solar

Attributing tough industry conditions to unfair Chinese subsidies, a consortium of solar companies led by German company SolarWorld filed a complaint against Chinese competitors such as Suntech Power (NYSE:STP). SolarWorld accused these low-cost operators of benefiting from “cash grants, preferential loans, discounts on raw materials, tax incentives and currency manipulation” which has resulted in a loss of business and loss of jobs in the U.S. [2]

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First Solar, which itself is a recipient of government support in the form of Export-Import Bank loan guarantees, chose to stay out of the dispute by stating that it is a global player believing in free and fair trade. [3] (See: First Solar Hopes for Boost From Indian Solar Auctions) The company, which earlier failed to secure a Department of Energy loan guarantee for its 550 MW Topaz power project, is expected to see reduced support from the government following the Solyndra bankruptcy. [4]

We have a $110 price estimate for First Solar which is about a 110% premium over its current market price.

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Notes:
  1. FSLR: Goldman Sets New Six-Month $90 Target, Cuts Estimates, Barrons [↩]
  2. U.S. Solar Companies Seek Tax on Chinese Imports Claiming Unfair State Aid, Bloomberg [↩]
  3. SolarWorld’s US-China Trade Claim: A Few More Words, GreenTech Solar [↩]
  4. First Solar says DOE loss won’t cause delays, Reuters [↩]