First Solar Stock Faces More Headwinds After Downgrade

Options traders are heavily call-skewed on First Solar

Jun 5, 2018 at 9:31 AM
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First Solar, Inc. (NASDAQ:FSLR) yesterday fell 6.4%, breaching its 200-day moving average for the first time in over a year, due to China's new restrictive policies on the solar industry. The shares are again under pressure today, last seen trading 4.4% lower at $59.12, after BofA-Merrill Lynch downgraded the solar stock to "neutral" from "buy," and lowered its price target to $63 from $83. The analyst in coverage believes China's recent announcement could result in increased competition back in the U.S., and may pressure the company's margins going forward. 

Most analysts tracking First Solar are for the time being still bullish. By the numbers, 14 brokerage firms are in coverage, and nine of them say to buy the shares. Moreover, the average 12-month price target among this group is $79.51, representing a nearly 28.8% premium from yesterday's close. As contrarians, we would suggest paying close attention to FSLR in the near term, as continued underperformance could result in an extended round of bearish analyst attention.

Plus, it's also worth noting that near-term options traders are heavily call-skewed at the moment. This is based on the security's Schaeffer's put/call open interest ratio (SOIR) of 0.48. Not only does this show call open interest among options expiring within three months more than doubles put open interest, but the reading ranks just 2 percentage points from a 12-month low. In short, an unwinding of these seemingly bullish positions could act as a headwind for FSLR stock in the near term.

 

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