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Why First Solar Stock Plunged Today

By Travis Hoium - Apr 30, 2021 at 1:33PM

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The quarterly results were good, but guidance left a lot to be desired.

What happened 

Shares of solar manufacturer First Solar (FSLR 0.03%) fell as much as 10.6% on Friday after the company reported first-quarter 2021 financial results. The solar energy stock moved lower for most of the morning and was down 10.5% as of 1:25 p.m. EDT.

So what

First-quarter revenue was $803 million and net income was $209.7 million, or $1.96 per share. Analysts were expecting earnings of $1.03 per share on revenue of $785 million, so results easily topped that bar. But it was guidance that was in focus today. 

First Solar power plant in a desert.

Image source: First Solar.

Management slightly increased the top end of revenue guidance for 2021 by $25 million to a range of $2.85 billion to $3.025 billion. But the bottom end of the gross margin range was reduced by $15 million to a range of $695 million to $775 million. The implication is that revenue could be higher than previously expected but margins could be lower. 

Now what

When a company expects higher revenue, it usually means that earnings will be higher as well, which is why investors are worried about falling margins. Companies have been dealing with raw material cost headwinds and First Solar is no different. That's what's affecting the bottom line and a big reason why shares are trading lower today.

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