First Solar (FSLR) Stock: Here's Why It's Falling

First Solar, Inc. (NASDAQ: FSLR)

First Solar is having an incredibly rough day in the market today, and for good reason. The company released its earnings report, and while earnings came in well ahead of expectations, investors are worried about revenue. Not to mention, the company also announced that a new CEO will be taking hold of the company. Today, we’ll talk about the report, how the market reacted to the news, and what we can expect to see from FSLR moving forward. So, let’s get right to it…

FSLR Reports Earnings

As mentioned above, First Solar reported its earnings for the first quarter recently. While the earnings side of the report was positive, there was something in revenue that concerned investors. Here’s what we saw…

  • Earnings – In the first quarter, FSLR did not disappoint when it came to earnings. During the quarter, analysts expected that the company would generate earnings in the amount of $0.91 per share. However, the company actually proved an 82.4% earnings surprise, generating earnings in the amount of $1.66 per share for the quarter. This was reflective of higher sales, gross profits, operating income, and lower expenses.
  • Revenue – While earnings were overwhelmingly positive, FSLR reported disappointing revenue for the quarter. During the first quarter, analysts expected that the company would produce revenue in the amount of $962 million. However, the company fell short of these expectations by 13.4%, producing revenue in the amount of $848.5 million.
  • CEO Changes – On top of releasing earnings, the company announced that it will be appointing a new CEO. Effective on July 1st, Mark Widmar, the company’s current CFO will be acting as the CEO for First Solar.
  • Guidance – During the release, the company also reaffirmed its revenue guidance for the year 2016. It is expecting to generate between $3.8 and $4 billion in the year. In terms of gross margins, it raised its guidance from between 17% and 18% to between 18% and 19%. Operating income guidance for the year is coming in the range between $300 million and $370 million, up from $260 million to $330 million.

How The Market Reacted To The News

As investors, one of the first things we learn is that when earnings are released, we can expect to see big movement in the stock associated with the release. Generally, strong earnings will lead to strong gains while weak earnings will lead to losses. In this particular case, I view the FSLR earnings report as overwhelmingly positive. Nonetheless, investors are proving to be concerned with regard to revenue, sending the value of the stock down. Currently (11:55), FSLR is trading at $58.14 per share after a loss of $3.89 per share or 6.27% thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from FSLR. First and foremost, the adverse reaction to the earnings is a mis-step by investors in my opinion. The reality is that the earnings report proved incredible growth and was overwhelmingly positive all in all. I understand concerns with regard to revenue, but I see no reason to hold onto this when guidance and earnings proved to be so positive. With that said, I’m expecting that we will see a relatively fast recovery followed by long run gains on the stock.

What Do You Think?

Where do you think FSLR is headed moving forward and why? Let us know your opinion in the comments below!