Argus Rating: SELL � We are lowering our near-term rating on First Solar Inc. to SELL from HOLD based on valuation. � FSLR shares have climbed more than 30% in July alone and recently traded near $120, implying a projected current-year P/E of more than 230. � Our valuation analysis now suggests a fundamental trading range of $62-$77 per share. Even applying a significant premium for technology improvements and increased industry subsidies, the top end of our valuation range extends to just $88 per share. � First Solar's operational improvements have been running ahead of schedule, and industry conditions have improved markedly in recent months as interest in alternative energy investments has skyrocketed. � On July 9, First Solar announced that it had entered into five new long-term supply contracts for the manufacture and sale of 685 megawatts of solar modules. The agreements are valued at a total of $1.2 billion and run through 2012. � Our EPS estimates remain $0.52 for 2007 and $1.07 for 2008. � Our financial strength rating on the company is Medium, the midpoint on our five-point scale. Analysis by Kevin Calabrese, 7/12/07 INVESTMENT THESIS We are lowering our near-term rating on First Solar Inc. (NGM: FSLR) to SELL from HOLD based on valuation. Over the last several quarters, demand for low-cost modules has risen rapidly due both to increased industry subsidies and a shortage of traditional silicon modules. As a result, FSLR's business has grown more quickly than expected. Nevertheless, we expect the costs associated with this growth to severely impact margins - and profits - in the near term.