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Valens Research Weekly Equity Idea Highlight for January 17, 2018 – First Solar, Inc.

January 19, 2018

This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.

FSLR’s better execution and lower credit risk than peers, low expectations and building confidence about their outlook signal materal upside potential

Market expectations for FSLR are currently at historical low levels. The market is expecting UAFRS-based (Uniform) ROA to remain consistently below cost-of-capital levels, with Uniform Asset growth at only slightly positive levels. FSLR has historically been the best operator in the solar space, consistently producing positive returns even as peers have suffered. Also, FSLR has avoided the credit issues of peers by maintaining a very safe balance sheet even in challenging environments. Even with the company’s historical superior execution and risk control, they are currently trading at the low end of peer valuation. Clearly, the market is not recognizing that part of their recent poor performance was a decision to leapfrog their technology cycle. Instead, the market is assuming that the company will continue to struggle like their peers.

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