Solar flares are sputtering from the solar sector of late as margins look to be under excessive pressure and outlooks appear cloudy. First Solar, Inc. (NASDAQ:FSLR) reported earnings last week and disappointed Wall Street. The stock was punished. Today again, First Solar Inc. is under quite a bit of pressure after an analyst from Wunderlich Securities started the company with a sell rating and a price target of $90.
Other companies have seen similar earnings pressure and comments from their management. Canadian Solar Inc. (NASDAQ:CSIQ) tumbled late last week and continued its fall early this week. The company cut gross margins. The rest of the sector has seen their stock prices drop as the big worry on margins continues.
While solar stocks have been one of the hottest sectors over the last few years, the massive influx of new companies entering the arena make it almost impossible for them all to survive with the supply increase. Margins will continue to shrink and there will be consolidation in the sector over the next two years.
Technical Analysis View
Pre market, First Solar Inc. is trading near $107, down almost 5%. $107 is a key area of support on the charts. However, other than a bounce being possible intra day or for a day, it is unlikely to hold in the coming weeks. The next major level of support for First Solar Inc. is at $99.50. This will act as a solid level for a bounce. If that breaks, the ultimate technical support is at $85.00.
The technicals on Canadian Solar Inc. are slightly different. With a gap down pre market, they show there is no major support until $18.00 – $18.50. At that level, the daily 200 moving average will be tagged. That will be a significant level and should see a bounce.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
