First Solar, Inc. (FSLR) — This company produces solar modules using proprietary technology to make ultra-thin chips. S&P Capital IQ Equity Research lauds the company for its superior balance sheet. However, its analysts are cautious about lagging demand after incentive reductions next year, as well as the quality of its backlog.
Competition in the key foreign markets of India and South Africa and currency difficulties resulting from a strong U.S. dollar could be a problem for growth. Margins are expected to narrow in 2016 from a projected 24% to 25% in 2015.
While Capital IQ forecasts earnings will increase 13% to $4.40 this year, they estimate they will fall 10% to $3.97 next year. Its analysts rate FSLR stock a “hold” with a 12-month target of $60, and there is little in the way of fundamentals to expect more from the stock.
Additionally, in the past three months, insiders have been selling shares at a rate of over 60-to-1.
Following the September sell-off, FSLR stock rose from a low under $41 to over $60. But on Thursday, my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), issued a sell signal in the middle of a major resistance zone. That zone was formed from March to May with support at about $59.75 and resistance at $65.
Thursday’s volume was above average, and shares closed slightly below the support line at $59.75, so that line now becomes resistance.
Sell FSLR stock short at $60 or higher with a three-month target of $52 for a projected gain of over 13%. Enter a stop-loss order at $65 to protect against a rally and theoretically unlimited losses.
