UPDATE 1-RESEARCH ALERT-JP Morgan downgrades Evergreen, Ascent

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Nov 18 (Reuters) - J.P. Morgan Securities downgraded Evergreen Solar Inc (ESLR.O) and Ascent Solar Technologies Inc (ASTI.O) to "underweight" from "neutral" and said it was unlikely that these companies could generate positive free cash flow until 2010.

Solar companies will face increased pricing pressure from lower subsidies in Europe and a potentially shrinking pool of capital available to system owners to finance solar projects, analyst Christopher Blansett wrote in a note to clients.

"Given this view, we recommend investors focus on companies that can absorb margin compression, can cut capex in order to remain FCF positive and are more likely to remain solvent in light of the possibility of further subsidy reductions in Europe in 2010," the analyst said.

Blansett also said the reduced solar subsidies next year, higher solar system borrowing costs and increased competition at all levels of the solar photovoltaic foodchain will cause pricing pressures for solar components.

He expects solar system and associated component prices to decline more than 25 percent in 2009, but sees solar demand to remain strong.

He also initiated coverage of First Solar Inc (FSLR.O) with an "overweight" rating and a price target of $102, and said the company already has significant manufacturing scale, a strong balance sheet and will better weather the turbulence facing the solar energy industry.

Shares of Ascent Solar Technologies closed at $3.84, while those of Evergreen Solar closed at $3.21 Monday on Nasdaq.

First Solar's stock closed at $115.55 Monday on Nasdaq. (Reporting by Shrutika Verma in Bangalore; Editing by Amitha Rajan)