Is it safe to invest in First Solar shares after missing expectations?

By:
on Nov 5, 2021
  • First Solar shares on Friday edged slightly lower after posting disappointing Q3 results.
  • The company announced its most recent quarterly results Thursday after markets closed, missing estimates.
  • FSLR maintained its upbeat FY2021 guidance despite the quarterly miss.

On Friday, First Solar Inc. (NASDAQ:FSLR) shares edged slightly lower after reporting its fiscal third-quarter results. The company announced its most recent quarterly results Thursday after markets closed, missing the consensus analyst estimates for revenue and earnings. FSLR chose to maintain its upbeat FY2021 guidance despite its disappointing fiscal third-quarter results.

The company posted FQ3 GAAP earnings per share of $0.42, missing the consensus Street estimate of $0.61. On the other hand, revenue for the quarter plunged by 37% from the same period a year ago to $584 million, missing the consensus for analyst estimates by $104 million.

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First Solar maintained its full-year 2021 earnings per share guidance of $4.00 to $4.60, ahead of the consensus Street forecast of $3.73.

Is First Solar a value trap?

From an investment perspective, First Solar shares trade at a reasonable P/E ratio of 22.15, making the stock a compelling option for value investors. However, with its forward P/E of 45.27 significantly above its trailing P/E, the current valuation multiple could be a value trap.

Therefore, although analysts forecast an EPS growth of about 442% this year, its long-term outlook looks less exciting.

Source – TradingView

Technically, First Solar shares seem to have recently found a trendline resistance, triggering a pullback. However, the stock still trades far from oversold conditions whilst having some distance above the trendline support.

Therefore, investors could target extended declines at about $108.85, or lower at $97.51. On the other hand, if the stock bounces back prematurely before retesting the trendline support, it could find resistance at $123.35, or higher at $134.57.

It is not too late to take profits

In summary, although First Solar shares seem to have recently pulled back, the stock is still up more than 67% since bottoming on 13th May.

Therefore, given its steep forward p/E ratio and the forecast earnings decline from next year, it may not be too late for profit-takers to swoop in.

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