First Solar Breaks Down but Could See Near-Term Support

First Solar, Inc. (FSLR) shares fell nearly 8% by midday on Friday after the company reported worse-than-expected fourth quarter financial results. Revenue rose 2.5% to $339.18 million – missing consensus estimates by $120.74 million – while net losses of 25 cents per share beat consensus estimates by six cents per share. Despite the lower systems and third-party module sales, the company raised its guidance on full-year revenue, EPS and shipments.

Analysts remain bullish on the stock despite the somewhat-expected drop in revenue. Deutsche Bank analyst Vishal Shah believes that the stock has "plenty of upside left" with the S6 ramp-up on track and sold-out production through the first half of 2020. He also indicated that there could be further earnings upside in 2019 through 2020 and reiterated the firm's Buy rating on First Solar shares with a $75.00 price target, which represents a 23% premium to the current $61.00 market price. (See also: 6 Favorite Buys of a Top-Rated Stock Picker.)

From a technical standpoint, the stock nearly touched the 50-day moving average at around $68.00 earlier this month before taking a turn lower. The relative strength index (RSI) fell near oversold levels of 35.13, while the moving average convergence divergence (MACD) experienced a bearish crossover. Although the price action has been bearish, the stock has some near-term support levels that could suggest consolidation ahead.

Traders should watch for some consolidation above trendline and S2 support levels at around $59.37 before a potential move higher. If the stock rebounds from these levels, traders should watch for a breakout from S1 resistance at $63.27 to retest the 50-day moving average. If the stock breaks down from these levels, traders should watch for a move to the 200-day moving average at $52.52, where it could see some support. (For additional reading, check out: The History of First Solar.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.