Analyst's Notes. Argus Recommendations

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1 Report created Nov 14, 2017 Page 1 OF 5 First Solar designs, develops, manufactures and markets a line of thin-film semiconductor photovoltaic (PV) cells and modules that convert sunlight into electricity. The company's products, based on cadmium telluride technology, are used to provide reliable and environmentally friendly electric power. Using a very thin coating of semiconductor material over a glass sheet allows FSLR to produce PV modules at a much lower cost than traditional wafer technology. The group has installed over 17 GW in solar energy solutions worldwide. Analyst's Notes Analysis by David Coleman, November 13, 2017 ARGUS RATING: HOLD Maintaining HOLD despite strong 3Q results FSLR shares have been strong performers over the past three months, rising 25.7% while the S&P 500 has advanced 4.3%. The company recently reported 3Q17 EPS that topped the consensus forecast. On valuation, FSLR is trading at 24.3-times our revised 2017 EPS forecast, near the high end of the company's historical average range and above the peer average of 22. Given that the company earned $2.84 per share in the first nine months of the year, its full-year guidance of $2.40-$2.60 implies a 4Q loss of $0.24-$0.44 per share. We expect a loss of $0.33 per share in 4Q17. We also expect EPS to decline in INVESTMENT THESIS We are maintaining our HOLD rating on First Solar Inc. (NGS: FSLR), a leading solar energy company, as it transitions from its Series 4 to its Series 6 module. We view FSLR as well positioned in the solar industry based on its positive cash flow, solid balance sheet, and focus on cadmium telluride technology, which should provide a cost advantage relative to more commoditized technologies like polysilicon. In particular, FSLR's technological investments have enabled the company to lower the cost of solar generation on a per-watt basis and to improve its conversion efficiency. They have also helped the company to expand its opportunity set of utility-scale projects. On valuation, FSLR is trading at 24.3-times our revised 2017 EPS forecast, near the high end of the company's historical average range and above the peer average of 22. Investors should expect FSLR's financial results to be uneven on a quarter-to-quarter and year-to-year basis due to the timing of revenue recognition. We would like to see a stronger company and industry outlook before considering a higher rating on FSLR. RECENT DEVELOPMENTS Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) Rating EPS ($) Quarterly Week High: $ Week Low: $46.09 Closed at $61.59 on 11/10 Annual ( Estimate) 1.28 ( Estimate) Revenue ($ in Bil.) Quarterly Annual ( Estimate) 2.4 ( Estimate) FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Dec BUY HOLD SELL Argus Recommendations Twelve Month Rating SELL HOLD BUY Five Year Rating SELL HOLD BUY Rating Weight Under Over Weight Weight Argus assigns a 12-month BUY, HOLD, or SELL rating to each stock under coverage. BUY-rated stocks are expected to outperform the market (the benchmark S&P 500 Index) on a risk-adjusted basis over the next year. HOLD-rated stocks are expected to perform in line with the market. SELL-rated stocks are expected to underperform the market on a risk-adjusted basis. The distribution of ratings across Argus' entire company universe is: 50% Buy, 45% Hold, 6% Sell. Key Statistics Key Statistics pricing data reflects previous trading day's closing price. Other applicable data are trailing 12-months unless otherwise specified Overview Price $61.57 Target Price Week Price Range $25.56 to $62.57 Shares Outstanding Million Dividend $0.00 Overview Technology Rating OVER WEIGHT Total % of S&P 500 Cap % Financial Strength Financial Strength Rating MEDIUM Debt/Capital Ratio 3.5% Return on Equity 3.9% Net Margin -14.7% Payout Ratio -- Current Ratio 4.21 Revenue $3.08 Billion After-Tax Income -$ Million Valuation Current FY P/E Prior FY P/E Price/Sales 2.09 Price/Book 1.17 Book Value/Share $52.78 Capitalization $6.43 Billion Forecasted Growth 1 Year EPS Growth Forecast % 5 Year EPS Growth Forecast 10.00% 1 Year Dividend Growth Forecast N/A Risk Beta 1.49 Institutional Ownership 51.95%

2 Report created Nov 14, 2017 Page 2 OF 5 FSLR shares have been strong performers over the past three months, rising 25.7% while the S&P 500 has advanced 4.3%. The shares have also outperformed over the past year, with an increase of 80% compared to a gain of 22% for the index. The beta on the volatile shares is On October 26, the company reported 3Q net sales of $1.1 billion, up from $681 million in 3Q16. The increase was driven by the sale of the California Flats and Cuyama projects and higher third-party module sales. Third-quarter net income came to $208 million, up from $127 million in the prior-year period. Third-quarter adjusted EPS rose to $1.95 from $1.22 in 3Q16, topping the consensus forecast of $0.84. In the first nine months of the year, the company earned $2.84 per share. Along with the 3Q results, management updated its full-year guidance. It continues to expect 2017 revenue of $3.0-$3.1 billion. It now expects a gross margin of 18%, up from its prior forecast of 17%-18%. It has raised its non-gaap operating income projection to $210-$230 million from $170-$220 million, and its non-gaap EPS guidance to $2.40-$2.60 from $2.00-$2.50, which assumes a full-year tax benefit of $25-$30 million. It reiterated its cash flow forecast of $850-$950 million and its operating expense estimate of $370-$395 million. FLSR expects to produce approximately 2.3 GW of solar modules in EARNINGS & GROWTH ANALYSIS Reflecting challenging conditions in the solar industry and decreased demand in China, First Solar announced in November 2016 that it would accelerate production of its Series 6 module into 2018 and entirely bypass the previously planned Series 5. It will also phase out production of the Series 4. Management believes that the revised schedule will better position the company for long-term growth. As of September 30, 2017, the company had 18 installed production lines at its manufacturing facilities in Perrysburg, Ohio and Kulim, Malaysia. It produced 0.5 GW of solar modules in 3Q17, down 32% from the same period in The decrease was driven mainly by the decision to phase out production of the Series 4 and accelerate the transition to the Series 6. The transition will include the start of operations at a new manufacturing plant in Vietnam. We expect lower earnings in 2018 as the company converts to the Series 6. On the 3Q conference call, management said that it expects to begin Series 6 production in Ohio in 2Q18 and in Malaysia in the second half of We are raising our 2017 EPS estimate to $2.51 from $2.07 based on the better-than-expected 3Q earnings and management's revised guidance. We are maintaining our 2018 estimate of $1.28. Given that the company earned $2.84 per share in the first nine months of 2017, its full-year EPS guidance of $2.40-$2.60 implies a loss of $0.24-$0.44 per share in 4Q17. FINANCIAL STRENGTH & DIVIDEND Growth & Valuation Analysis GROWTH ANALYSIS ($ in Millions, except per share data) Revenue 3,369 3,309 3,392 3,579 2,951 COGS 2,516 2,446 2,565 2,660 2,247 Gross Profit SG&A R&D Operating Income Interest Expense Pretax Income Income Taxes Tax Rate (%) 8 7 Net Income Diluted Shares Outstanding EPS Dividend GROWTH RATES (%) Revenue Operating Income Net Income EPS Dividend Sustainable Growth Rate VALUATION ANALYSIS Price: High $50.20 $65.99 $74.84 $67.80 $74.29 Price: Low $11.43 $24.46 $40.54 $39.18 $28.60 Price/Sales: High-Low P/E: High-Low Price/Cash Flow: High-Low Financial & Risk Analysis FINANCIAL STRENGTH Cash ($ in Millions) 1,482 1,127 1,347 Working Capital ($ in Millions) 2,189 2,385 2,887 Current Ratio LT Debt/Equity Ratio (%) Total Debt/Equity Ratio (%) RATIOS (%) Gross Profit Margin Operating Margin Net Margin Return On Assets Return On Equity RISK ANALYSIS Cash Cycle (days) Cash Flow/Cap Ex Oper. Income/Int. Exp. (ratio) Payout Ratio The data contained on this page of this report has been provided by Morningstar, Inc. ( 2017 Morningstar, Inc. All Rights Reserved). This data (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. This data is set forth herein for historical reference only and is not necessarily used in Argus analysis of the stock set forth on this page of this report or any other stock or other security. All earnings figures are in GAAP.

3 Report created Nov 14, 2017 Page 3 OF 5 Our financial strength rating on First Solar is Medium, the middle rank on our five-point scale. The company is not rated by any of the rating agencies. In 3Q17, the company had a GAAP operating margin of 19.0%. Cash and cash equivalents totaled $2.72 billion at the end of 3Q17, up from $2.09 billion a year earlier. Cash from operations was $581 million, compared to cash used in operations of $84 million in 3Q16. Long-term debt rose to $330 million from $161 million in the prior-year period. The long-term debt/cap ratio at the end of the quarter was 5.6% up from 2.4% a year earlier. The company has a 28% stake in 8point3 Energy Partners LP, a company formed by First Solar and SunPower Corp. in FSLR has received a total of $17 million in distributions from the company thus far in First Solar does not pay a dividend and is unlikely to implement one in the near term. The company does not repurchase stock. MANAGEMENT & RISKS James Hughes retired as CEO in June 2016 and was succeeded by CFO Mark Widmar. Alex Bradley became interim CFO in July 2016 and permanent CFO in October. Philip Tymen dejong became the company's COO in July Georges Antoun was appointed chief commercial officer in July The greatest risk for First Solar is that in radically reworking its go-to-market model, the company miscalculates the available market opportunity, particularly in the solar utility market outside the U.S. We believe that the company has the large project personnel, experience, and track record to lead in the solar utility market on a global basis, much as it dominates in the U.S. At this stage, we believe that a primary risk to an investment in FSLR remains a resetting of industry valuations, as energy prices remain volatile, industry competition remains fierce, and strained government budgets coupled with a changing political climate create increased risk for subsidies. Pricing in some markets has become fiercer, affecting both Purchase Power Agreements (PPA's) and First Solar's modules; the company must maintain a balance so that the return on capital will be commensurate with the underlying risks. 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. The company also faces interest rate and foreign currency risks, though it does use hedging to mitigate these risks. First Solar's foray into the ownership of solar projects increases the company's financial risks and may significantly extend the time for a return on investment from such projects. This is a factor for investors to watch if it becomes a significant piece of the business going forward. In December 2015, Congress extended its 30% investment tax credit on solar systems to While this strengthened the broad outlook for the solar power industry, the earlier deadline resulted Peer & Industry Analysis The graphics in this section are designed to allow investors to compare FSLR versus its industry peers, the broader sector, and the market as a whole, as defined by the Argus Universe of Coverage. The scatterplot shows how FSLR stacks up versus its peers on two key characteristics: long-term growth and value. In general, companies in the lower left-hand corner are more value-oriented, while those in the upper right-hand corner are more growth-oriented. The table builds on the scatterplot by displaying more financial information. The bar charts on the right take the analysis two steps further, by broadening the comparison groups into the sector level and the market as a whole. This tool is designed to help investors understand how FSLR might fit into or modify a diversified portfolio. P/E Value XLNX FSLR CAVM VSM MCHP SWKS 5-yr Growth Rate(%) ADI AMD Growth 5-yr Net 1-yr EPS Cap Growth Current Margin Growth Argus Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating ADI Analog Devices Inc. 33, BUY MCHP Microchip Technology Inc 21, BUY SWKS Skyworks Solutions Inc 20, BUY XLNX Xilinx Inc 18, BUY AMD Advanced Micro Devices Inc. 10, HOLD FSLR First Solar Inc 6, HOLD CAVM Cavium Inc 5, BUY VSM Versum Materials Inc 4, HOLD Peer Average 14, P/E Price/Sales Price/Book PEG 5 Year Growth Debt/Capital

4 Report created Nov 14, 2017 Page 4 OF 5 in a rush to complete installations, benefiting results in early However, with the deadline extended, customers have felt less urgency to complete projects in 2017 and In addition, the outlook for federal programs supporting solar power has become less certain under the Trump administration. COMPANY DESCRIPTION First Solar designs, develops, manufactures and markets a line of thin-film semiconductor photovoltaic (PV) cells and modules that convert sunlight into electricity. The company's products, based on cadmium telluride technology, are used to provide reliable and environmentally friendly electric power. Using a very thin coating of semiconductor material over a glass sheet allows FSLR to produce PV modules at a much lower cost than traditional wafer technology. The group has installed over 17 GW in solar energy solutions worldwide. VALUATION We believe that FSLR shares are fairly valued at current prices near $61. The shares have traded between $25 and $62 over the last 52 weeks and are currently near the high end of the range. From a technical standpoint, the shares have been in a bullish pattern of higher highs and higher lows since establishing a double-bottom in March-April The shares recently broke through resistance at $50 following the company's stronger-than-expected 3Q17 results. From a fundamental standpoint, valuations are mixed. FSLR trades at 24.3-times our revised 2017 EPS forecast, near the high end of the historical average range and above the peer average of 22. It also trades at 2.1-times sales, below the industry average of 4.4 but above the five-year average of 1.4. The price/book ratio is 1.2, below the peer average of 4.2 but above the five-year average of 1.0. The price/cash flow ratio is 5.2, below the peer average of 20. While 3Q17 was solid, management's guidance implies a loss in the current fourth quarter. We would like to see a stronger company and industry outlook before considering a higher rating on FSLR. On November 13, HOLD-rated FSLR closed at $61.57, down $0.02.

5 METHODOLOGY & DISCLAIMERS Report created Nov 14, 2017 Page 5 OF 5 About Argus Argus Research, founded by Economist Harold Dorsey in 1934, has built a top-down, fundamental system that is used by Argus analysts. This six-point system includes Industry Analysis, Growth Analysis, Financial Strength Analysis, Management Assessment, Risk Analysis and Valuation Analysis. Utilizing forecasts from Argus Economist, the Industry Analysis identifies industries expected to perform well over the next one-to-two years. The Growth Analysis generates proprietary estimates for companies under coverage. In the Financial Strength Analysis, analysts study ratios to understand profitability, liquidity and capital structure. During the Management Assessment, analysts meet with and familiarize themselves with the processes of corporate management teams. Quantitative trends and qualitative threats are assessed under the Risk Analysis. And finally, Argus Valuation Analysis model integrates a historical ratio matrix, discounted cash flow modeling, and peer comparison. THE ARGUS RESEARCH RATING SYSTEM Argus uses three ratings for stocks: BUY, HOLD, and SELL. Stocks are rated relative to a benchmark, the S&P 500. A BUY-rated stock is expected to outperform the S&P 500 on a risk-adjusted basis over a 12-month period. To make this determination, Argus Analysts set target prices, use beta as the measure of risk, and compare expected risk-adjusted stock returns to the S&P 500 forecasts set by the Argus Strategist. A HOLD-rated stock is expected to perform in line with the S&P 500. A SELL-rated stock is expected to underperform the S&P 500. Argus Research Disclaimer Argus Research is an independent investment research provider and is not a member of the FINRA or the SIPC. Argus Research is not a registered broker dealer and does not have investment banking operations. The Argus trademark, service mark and logo are the intellectual property of Argus Group Inc. The information contained in this research report is produced and copyrighted by Argus, and any unauthorized use, duplication, redistribution or disclosure is prohibited by law and can result in prosecution. The content of this report may be derived from Argus research reports, notes, or analyses. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. This report is not an offer to sell or a solicitation of an offer to buy any security. The information and material presented in this report are for general information only and do not specifically address individual investment objectives, financial situations or the particular needs of any specific person who may receive this report. Investing in any security or investment strategies discussed may not be suitable for you and it is recommended that you consult an independent investment advisor. Nothing in this report constitutes individual investment, legal or tax advice. Argus may issue or may have issued other reports that are inconsistent with or may reach different conclusions than those represented in this report, and all opinions are reflective of judgments made on the original date of publication. Argus is under no obligation to ensure that other reports are brought to the attention of any recipient of this report. Argus shall accept no liability for any loss arising from the use of this report, nor shall Argus treat all recipients of this report as customers simply by virtue of their receipt of this material. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus has provided independent research since Argus officers, employees, agents and/or affiliates may have positions in stocks discussed in this report. No Argus officers, employees, agents and/or affiliates may serve as officers or directors of covered companies, or may own more than one percent of a covered company s stock. Morningstar Disclaimer 2017 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.