LOS ANGELES U.S. solar company First Solar Inc lowered the top end of its 2011 sales forecast and said it cut prices in anticipation of solar subsidy cutbacks that could hamper demand in Europe, and its stock fell 3.8 percent after hours.
The world's biggest solar company by market value, First Solar is creating a pipeline of solar power projects around the world as a channel for its cadmium telluride panels, which are the cheapest in the industry.
The solar industry relies on government incentives to make electricity created by the sun competitive with sources such as coal and natural gas. Many governments, particularly in Europe, have implemented generous subsidies for solar power in recent years as they seek to reduce their reliance on fossil fuels and combat climate change.
First Solar expects to build 400 MW of projects in North America this year, although it still has a strong presence in Europe, where markets such as Germany, Italy and France are expected to cut back incentives for solar power after several years of booming industry growth.
The company said it adjusted prices in December to in anticipation of feed-in tariff cuts in Germany and other European markets, and cut the top end of its 2001 sales forecast by $100 million.
First Solar now expects sales of $3.7 billion to $3.8 billion. It previously forecast sales of $3.8 billion to $3.9 billion.
"They still have a lot of exposure in Europe in 2011 and we're all waiting to see how the policy unfolds," Wedbush analyst Christine Hersey, who has an "underperform" rating on First Solar's stock. "They are a little more cautious on pricing in the open market at this point."
Investors in solar stocks fretted over a looming drop in European demand for much of last year, but have warmed to the sector in 2011.
First Solar shares have gained 27 percent so far this year, although nearly 18 percent of its outstanding stock was held in a short position as of January 31. Short interest is often a gauge of the level of skepticism among investors.
"It's one of the most heavily shorted stocks in the S&P," Gleacher & Co analyst John Hardy said, although he said the company's "underlying operating metrics are very strong."
The stock was down 3.8 percent in extended trading at $158.45 after closing at $164.68 on the Nasdaq.
NORTH AMERICAN BUFFER
On a conference call with analysts, First Solar Chief Executive Rob Gillette said the company would sell 15 percent to 20 percent of its 2011 module production in Italy this year and an additional 10 percent to 15 percent in France.
If those markets retreat more than expected, Gillette added, First Solar has the flexibility to build additional megawatts in North America.
"We plan to use our 2.4 gigawatt North American pipeline as a buffer against demand fluctuations in Europe," Gillette said.
The Tempe, Arizona company said it put plans for a module production facility in France on hold pending a government decision on that nation's support for solar power.
As a result, the company trimmed its expected plant start-up expenses for the year, which along with a lower tax rate boosted its earnings per share outlook for 2011.
For 2011, First Solar expects to earn $9.25 per share to $9.75 per share, up from a range of $8.75 per share to $9.50 per share.
Also on Thursday, First Solar reported a fourth-quarter profit that rose 10 percent, topping analysts' estimates.
Quarterly net income was $155.9 million, or $1.80 per share, compared with $141.6 million, or $1.65 per share, a year ago.
Wall Street analysts, on average, had been expecting earnings of $1.77 per share, according to Thomson Reuters I/B/E/S.
Revenue fell 5 percent to $610 million, below the $648.44 million analysts had forecast.
(Reporting by Nichola Groom; additional reporting by Matt Daily in New York; editing by Steve Orlofsky and Andre Grenon)