How Will First Solar’s Bookings Trend Over Q3?

First Solar (NASDAQ:FSLR) is expected to publish its Q3 2018 results on October 25, reporting on what is likely to have been a challenging quarter for the solar market, on account of declining demand from China and lower average selling prices. However, the company’s results are unlikely to reflect the tough market conditions, considering its large bookings backlog (future expected shipments stood at 10.9 GW as of late July) and systems project executions. Below we take a look at some of the key factors that we will be watching when the company publishes earnings Thursday.

We have created an interactive dashboard analysis on what to expect from First Solar for 2018. You can modify the key drivers to arrive at your own forecasts and valuation for the company.

Bookings In Focus

First Solar’s bookings performance has outpaced the broader industry over the last several quarters, driven by its ongoing transition to the new high capacity Series 6 modules and also due to regulatory tailwinds in the U.S., where the company’s rivals’ panels have been subject to tariffs. However, there are signs that this momentum is cooling off. While First Solar booked a total of 3.3 GW of capacity from the beginning of the year through April 26, 2018, over the next three months, bookings declined significantly to just about 900 MW of capacity. It’s likely that the figure will decline further due to the current headwinds in the market. The Chinese government has significantly scaled back on its solar incentives this year, in a move that is expected to slash the country’s forecast capacity by 40%, to 28.8 GW from 48 GW this year. While First Solar doesn’t have a large exposure to China, aggregate global demand is likely to decline, causing a supply-demand imbalance, hurting ASPs.

Series 6 Transition Updates

We will also be looking for updates on the company’s transition to its new Series 6 panels, which it is expected to have ramped up over the third quarter. Over Q2, the company indicated that it faced some production issues, including lower than targeted throughput and yields.  The new panels could prove instrumental in beating the downturn for the company, as they are as much as 40% cheaper to produce compared to the company’s legacy Series 4 panels. Moreover, the panels provide a higher rated capacity, which allows the company to address a long-standing handicap versus silicon-based panels.