First Solar slides after cutting full-year sales guidance

What happened

First Solar fell 4.6% pre-market Friday even though results beat expectations, with revenue down 22% year over year to $1.23 billion. The company cut full-year net sales guidance to $4.6 billion to $4.9 billion from $4.9 billion to $5.2 billion.

Confirmed

Global impact / market context

A lower sales outlook can pull future revenue and profit expectations down, which weighs on a stock even when past results beat forecasts. Here the cut is tied mostly to lower-margin India volumes, so the hit to profit per sale may be smaller than the revenue headline suggests.

Analyst inference

Analysts say buyers are delaying purchases to use up a glut of inventory, which means excess supply that slows orders. The $500 million share buyback, which is company money used to repurchase stock, may support the price, while domestic profitability is described as resilient.

Analyst inference

What to watch

1. First Solar now expects full-year revenue of $4.6 billion to $4.9 billion and sales volume of 16 to 17 GW, down from prior guidance of $4.9 billion to $5.2 billion and 17 to 18.2 GW. Confirmed
2. Watch whether the planned $500 million share buyback, which means the company using its cash to repurchase its own stock, is carried out and how much it cushions the share price. Proposed
3. Watch U.S. domestic volume and profitability, which analysts say are unchanged, and the pace and economics of contracting remaining capacity later this decade, which they call key swing factors. Analyst inference

Evidence

• seekingalpha.com