First Solar’s stock plunges after JMP analyst swings to bearish from bullish on China policy changes
First Solar Inc.’s stock tumbled 7.3% in morning trade Wednesday toward a 7 1/2-month low, after JMP Securities analyst Joseph Osha swung to bearish from bullish on the solar cells maker, citing concerns over policy changes in China. Osha cut his rating to market underpeform, after being at market outperform since May 2017. He also slashed his stock price target by 47% to $46, which is 15% below current levels. The stock has now plummeted 20% this month, as trade talks between the U.S. and China continued over the weekend amid threats of tariffs from both sides. Osha said that while First Solar has done “a superb job” of positioning itself for a large-scale transition in solar panel manufacturing, he believes recent policy developments in China will likely put pressure on margins past 2019. The policy change is China’s National Development Reform Commission (NDRC) has cut feed-in-tariffs for utility-scale and distributed-generation projects by about 8 cents per kilowatt hour, and has removed its previous target of utility-scale installations and eliminated new utility-scale permits for now. “Pricing pressure is likely to accelerate outside of the U.S., and even inside the U.S. pricing may decline as Chinese suppliers look to compensate for a sharp decline in expected demand from their home market,” Osha wrote in a note to clients. The stock was still up 44% over the past 12 months, while the S&P 500 has gained 13%.