How Will The Series 6 Ramp-Up Impact First Solar’s Results?

by Trefis Team
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First Solar (NASDAQ:FSLR), the largest U.S. solar manufacturer, is expected to publish its Q2 2018 results on July 26. While we expect the company’s revenues to be driven by relatively robust demand in the United States and the production ramp of its new Series 6 modules, earnings for the quarter could be lower, on account of higher production start-up costs. Here’s a quick review of what to expect when the company publishes earnings.

We have created an interactive dashboard analysis showing our expectations for First Solar over 2018. You can modify the key drivers to arrive at your own forecasts and valuation for the company.

Demand In The U.S. Should Drive Sales

We expect First Solar’s revenues to be driven by demand from the United States, its principal market, where it has been witnessing tailwinds from the imposition of import duties on silicon-based panels and cells, to which its Cd-Te based products are not subject. As of its last earnings release, the company had a healthy bookings backlog of about 10.6 GW including both systems and third-party modules. Pricing for modules could look up over Q2 after seeing a relatively weak Q1, weighed down by lower ASPs for its Series 4 panels, associated with supply contracts that were signed several quarters ago. That said, the company expects gross margins for the modules business to remain low, partly due to ramp-related costs.

Impact Of China’s Solar Incentive Cuts

Last month, China indicated that it would be cutting its incentives for solar projects this year, in a move that could cut the country’s forecast capacity by 40%, to 28.8 GW from 48 GW this year. This could have significant repercussions for the global solar market, as China installed roughly 53 GW of capacity in 2017, accounting for about 54% of global installations. Although First Solar derives over three-quarters of its revenues from the U.S. market, where it currently enjoys some regulatory advantages, it’s possible that the company could see a limited impact on demand and pricing power considering the greater supply of panels in the global markets.

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