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The analyst believes that too much good news is priced in shares, which are susceptible to significant derating, hence the downgrade call.
Some may be surprised by the downgrade given last weeks news that the US Department of Commerce (DOC) is investigating alleged circumvention of antidumping and countervailing duties (AD/CVD) by solar manufacturers in Asia.
The analyst disagrees that this is a tailwind for FSLR as that policy has consistently failed drive pricing power.
We believe the stock has been trading on longer term expectations while what is likely to be more changeable in 2Q is slated to pull investors back to the present. We highlight still rising aluminum costs, and pass through on elevated bunkers as yet to materialize on freight in particular, the analyst said in a client note.
Dumoulin-Smith also notes significant multiple expansion since the messy Q4 print.
While Chinese peers are facing similar headwinds we emphasize most seeing positive revisions still even despite the policy headwinds with trading multiples flat. At the end of the day, expansion is not backed by fundamentals.
First Solar stock down nearly 3%.
By Senad Karaahmetovic
