First Solar shares tumble following formula

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SAN FRANCISCO (Reuters) - Shares of First Solar fell more than 7 percent on Friday as investors worried about the lowest-cost solar panel maker"s decreased profit margins and many brokerages cut the target price for the stock.

Investors were also disappointed that the company only maintained its profit outlook for 2010.

First Solar shares had rallied in the days ahead of Thursday"s earnings announcement on hopes the company would give a rosy outlook for 2010 demand.

On Friday, First Solar"s shares fell 7.1 percent to $117.28 in afternoon trade on Nasdaq.

The solar manufacturer had posted a higher-than-expected profit and revenue for the fourth quarter but its gross margin of 41.5 percent came in below expectations.

"Despite easily beating consensus estimates, 4Q EPS were, all-in-all, unimpressive," said Oppenheimer equity research analyst Gary Hsueh, who rates the company"s stock "perform."

Hsueh said the earnings per share could have been much higher if the margins were better.

Following the results, four brokerages -- Credit Suisse, Caris, FBR and WedBush -- cut the 12-month target price of the shares.

While investors were disappointed that the company maintained its 2010 guidance, analysts said the uncertainty in the second half of the year, after Germany executes its subsidy cuts, prevents the company from giving a more aggressive profit target.

Piper Jaffray analyst Jesse Pichel said the recent slide in euro is also a negative for First Solar, which sells mostly in euros.

Planned cuts to German solar subsidies have cast gloom across the industry in recent weeks, with analysts and experts predicting that demand in the world"s largest market for the renewable power source could shrink sharply later this year.

Still, the subsidy cuts that are expected to be put in place mid-year in Germany, the largest solar market for First Solar, is expected to drive strong demand during the first half of the year.

(Reporting by Poornima Gupta; Editing by Tim Dobbyn)