First Solar Powers Higher

First Solar (FSLR, $288.00, up $19.78) made a nice move today after an analyst raised the stock’s price target to $335 from $280 and said the company is on track for a super quarter. Three factors he cited for raising his price target were: Malaysia adding roughly $30 million to the company’s 2Q revenue, the exchange rate and a resolution of solar incentives in Spain. He also mentioned that First Solar could announce a big U.S. contract in the next week or two.

The stock made a nice 7% move for the day but that’s nothing new. First Solar is one of those rare stocks capable of making a 50-point move in a day let alone a week. In fact, the stock is up 50 points since hitting a low of $233 on 6/10…

The company is expected to announce earnings sometime in July but I haven’t confirmed the exact date, yet. We should know something soon and it’s always risky to play options around earnings. However, since we have about a month before earnings actually come out, buying the July contracts now shouldn’t be as risky as buying them the day before the earnings announcement.

Still, because the stock is so volatile, I normally stay away from plays like this one. There’s just too much risk. First Solar hit a high if $317 on 5/14 and quickly fell 64 points by 5/28. That would have been a huge hit to take if you had been long the May or June calls.

This time may be different though. Usually when a stock makes the types of moves First Solar has made, the stock will go back and “fill in some gaps” before resuming its uptrend. It’s too early to tell if First Solar is ready to challenge its highs or if it does, will the stock fade again? For what it’s worth, the July 300 calls (HJQGA, $13.70, up $6.20) were up over 80% on the news. They opened at $9.40 and hit a high of $13.90.

Rick Rouse
Rick@OptionsMentoring.com

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