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First Solar R&D ‘Paying Off,’ But Sales Remain ‘Uneven’: Argus

First Solar ‘s ( FSLR ) quarterly $31.5 million R&D spending average is starting to pay off, Argus analyst David Coleman said Wednesday, noting the No. 1 solar installer’s technology is becoming cost-competitive even without subsidies. Coleman rates First Solar stock a buy, but he slashed his price target to 66 from 90. Shares have pulled back 33% since hitting a 2016 high on March 18, as earnings last month missed Wall Street expectations. Over the past three months, First Solar stock has fallen 23.1% vs. a 6.8% gain in the S&P 500. But midday on the stock market today , First Solar stock was up nearly 2%, near 50. Shares of top rival SunPower ( SPWR ) were up a fraction, trailing IBD’s 20-company Energy-Solar industry group, which was higher by close to 2%, above 27, after touching a three-year low of 25.86 on May 10. The group ranks just No. 180 out of 197 groups tracked by IBD. First Solar stock was slammed on the company’s $100 million Q1 sales miss last month. Then, the firm announced CFO Mark Widmar would succeed CEO James Hughes, effective July 1. Hughes will join the board. But that sales miss was largely due to the timing of project revenue recognition, Coleman wrote in his research report. Predicting quarterly sales for developers like First Solar and SunPower can be tricky. This month, SunPower’s Q2 sales view lagged by $400 million. “Overall, we remain optimistic about the company’s long-term earnings power; however, investors should expect First Solar’s financial results to be uneven on a quarter-to-quarter and year-to-year basis due to the timing of revenue recognition,” he wrote. First Solar Rides Cadmium Telluride R&D During Q1, cash declined 3.5% sequentially to $1.1 billion, but First Solar remains profitable “even as its peers have been hurt by oversupplied markets and a lack of pricing power,” Coleman wrote. It investments in cadmium telluride technology are starting to pay off. “We see evidence that First Solar’s technological investments are paying off, as they have enabled the company to lower the cost of solar generation on a per-watt basis and to expand its opportunity set of utility-scale projects,” he wrote. Cadmium telluride should provide a cost advantage vs. more commoditized solar module technology such as polysilicon, Coleman wrote. In some markets, it’s becoming cost-competitive even without subsidies — a tough goal for solar companies still largely dependent on governmental whims. By 2025, First Solar expects to have 40 gigawatts in North American utility installations, implying 21.9% growth. The company also has bookings in Turkey, Japan, Australia, India and Africa, Coleman wrote. First Solar should also benefit from stricter environmental regulations on fossil-fuel-based power, and from increased government and public support for solar. Last year, the U.S. Congress extended the Investment Tax Credit (ITC) on solar by five years, avoiding a cliff in 2017 installations. The biggest risk lies in First Solar’s dependence on utility-scale deployments, Coleman wrote. “If the market for utility-scale solar power generation does not expand significantly over the next few years due to cost factors or technological or political developments, First Solar would likely experience slower-than-anticipated growth,” he said.

Microsoft Sheds Low-End Mobile Phone Business

Two years after Microsoft ( MSFT ) purchased Nokia ‘s ( NOK ) mobile phone unit, the software giant is moving to exit Nokia’s entry-level feature phone business. Microsoft announced Wednesday that it is selling the business for $350 million to FIH Mobile, a Hong Kong-listed subsidiary of Taiwan-based contract manufacturer Foxconn, and HMD Global, a newly created company in Finland that has licensed Nokia’s brand and intellectual property . Microsoft said it will continue to develop Windows smartphones, such as its Lumia devices, and will continue to support third-party handsets from partners like Acer, Alcatel, HP Inc. ( HPQ ), Trinity and Vaio. Feature phones are low-end devices that have limited capabilities compared with full-fledged smartphones. Feature phones are targeted mostly at customers in emerging markets. Microsoft bought the Nokia handset business in April 2014 for $7.5 billion, a deal negotiated by Microsoft’s previous CEO, Steve Ballmer, in September 2013. Microsoft wrote off the entire value of the deal in July 2015 when it recorded an impairment charge of $7.6 billion related to the Nokia assets. “Microsoft’s exit from the feature phone business is not at all surprising,” IHS analysts Ian Fogg and Daniel Gleeson said in a research report Wednesday. “The deal again highlights Microsoft’s continued failure in mobile.” Microsoft’s smartphone future is “up in the air” because the company hasn’t released any new flagship handsets for Windows 10 Mobile in a while, they said. Microsoft shipped just 2.3 million smartphones in the first quarter, down 70% from Q1 2015, IHS said. “Realistically Microsoft can hope to be no more than a bit player in the mobile phone market now,” Fogg and Gleeson said. The smartphone market is dominated by Apple ‘s ( AAPL ) iPhone and Android-based devices from Samsung and others. Microsoft stock was up a fraction in morning trading in the stock market today , near 51, but trading below its 50-day line since its earnings release late last month disappointed.

Does Analog Devices’ Soft Q3 Guidance Prove Apple’s iPhone 7 Cut?

Apple ‘s ( AAPL ) iPhone 7 expectations might have dug into guidance provided Wednesday by  Analog Devices ( ADI ), as the 3D Touch supplier topped Q2 expectations but guided to current-quarter sales that would dip 5% year over year. In early trading on the stock market today , Analog Devices shares were up a fraction, near 55.50. Fellow Apple suppliers Broadcom ( AVGO ), NXP Semiconductors ( NXPI ),  Skyworks Solutions ( SWKS ) and  Qorvo ( QRVO ) were up all by close to 2% or more. For its fiscal Q2 ended April 30, Analog Devices reported $779 million in sales and 64 cents earnings per share ex items, down a respective 5% and 12% vs. the year-earlier quarter. It was the first quarter in nine that Analog Devices’ sales have fallen and the second period of declining EPS. But both metrics beat the consensus of 29 analysts polled by Thomson Reuters for $777.6 million and 62 cents, as well as Analog Devices’ own guidance issued three months ago. Consumer sales toppled 27% year over year, leading a 3% fall in communications sales, Analog Devices said. Industrial and automotive sales — Analog Devices’ bread-and-butter segments — fell 1% apiece. For fiscal Q3, Analog Devices CEO Vincent Roche sees a return to consumer market growth and mid- to high-single-digit growth in the company’s business-to-business segments. But the high point of ADI’s Q3 sales and EPS guidance lagged Wall Street consensus. Analog Devices guided to $800 million to $840 million in sales and 66-74 cents, down a respective 5% and 9% vs. the year-earlier quarter, missing analysts’ model for $846.6 million and 75 cents. On average, Analog Devices’ Q3 sales have grown 13.5% year over year, trailing 20% growth in Q4. But recent reports indicate Apple might have cut its component orders for the iPhone 7, expected to be released in September.