LOS ANGELES Shares of First Solar Inc slid 10 percent and dragged down the rest of the solar sector Friday, a day after the industry bellwether posted a quarterly profit that pummeled Wall Street estimates but said it would resort to rebates to defend its market position in Germany.
The stock fell $18.09 to $155.46 in afternoon trading on the Nasdaq. Shares of U.S. rival Sunpower Corp were down 4.25 percent at $32.03, while top Chinese solar company Suntech Power slid 4.6 percent to $18.38.
Evergreen Solar Inc, which reported a wider-than-expected quarterly loss on Thursday, fell 12.6 percent to $2.08.
Credit Suisse analyst Satya Kumar downgraded First Solar to "neutral" from "outperform," saying the current quarter would "be the last good quarter for a while ... we expect the stock to look ahead of this peaking earnings momentum and pull back to lower levels."
Other analysts, including from Barclays Capital, Jefferies & Co and UBS, lowered their price targets for Tempe, Arizona-based First Solar's stock.
Caris & Co downgraded Evergreen to an "average" rating, saying price erosion was taking a toll on profitability.
The solar power industry has suffered this year as the global credit crisis has dried up available financing for renewable energy projects and a pullback in government subsidies in Spain and Germany has made demand fall. That slump has created a global glut in the supply of solar panels, which has sent prices tumbling and hurt producers' profits.
First Solar has weathered the global recession better than many of its peers because its cadmium telluride panels are cheaper to produce than the silicon-based panels that dominate the market. A slide in prices on silicon-based panels, however, has started to chip away at First Solar's competitive edge.
On Thursday, the company disappointed investors when it said it would offer a rebate program in Germany to preserve its market position. The market was also disappointed that the company left its revenue and gross margin outlook for 2009 unchanged, rather than raising it.
Since the beginning of the year, First Solar shares have rallied about 13 percent, but they are still well below the lifetime high of $317 reached in May 2008.
About 8.8 million First Solar shares were held in short positions as of July 15, an increase of 7 percent from two weeks earlier. That accounts for about 10.3 percent of the company's 85.7 million shares outstanding as of June 27. when it reported a wider-than-expected quarterly loss.
In Germany, where First Solar will start to offer rebates, shares of German solar companies fell. SolarWorld edged down 2.29 percent, while Q-Cells and Conergy fell slightly before closing unchanged on Friday.
"We thus continue to believe that there are more downside risks rather than upside opportunities in most of the German solar stocks, especially for the downstream manufacturers," said Equinet analyst Sebastian Growe.
(Reporting by Laura Isensee, editing by Nichola Groom and John Wallace)