Why First Solar, Inc.'s Shares Plunged Today

Is this meaningful or just another movement?

Jan 6, 2014 at 5:13PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of First Solar, (NASDAQ:FSLR) fell as much as 10% today after the stock was downgraded by an analyst.

So what: Goldman Sachs analyst Brian Lee downgraded the stock from buy to sell and put a $45 price target on the stock. Lee thinks First Solar's earnings will decline because it has almost 100% exposure to the utility market and no exposure to the growing residential market.  

Now what: We don't like to put too much stock in Wall Street's recommendations because they have a history of underperforming the market and also have little incentive to get their buy and sell calls right. As for First Solar, it's true that the company is shut out of residential solar but we need to keep in mind that the utility scale solar business is much larger than residential solar and First Solar is a world class project builder. While I don't think the stock is the best in solar I think it's the safest way to play the industry and wouldn't give up on this industry giant just yet.

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Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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