It was a strange quarter for solar panel maker First Solar (FSLR) last night. The company reiterated its forecast for 2009 revenue, which was probably expected, but it also beat Q2 revenue, leaving some disappointed with the lack of upside for the rest of the year. Moreover, the big issue on the call, the decision by the company to offer rebates in Germany is paradoxical given that it was $84 million in revenue from Germany, analysts say, that helped the company beat Q2 expectations. Do the rebates signal a continuing threat of price erosion and stalled customers as First Solar competitors cut their prices?

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Shares of solar panel technology maker First Solar (FSLR) are reversing course this evening, falling to $170 after briefly going as high as $189 following a clean Q2 beat. What’s spooked people are the company’s remarks on a conference call this evening about growing uncertainty in its German market.

The company has seen increasing price-cuts among competitors selling into Germany’s solar power market. Although First Solar makes panels from a thin-film semiconductor technology, it started to see trouble in the German market from manufacturers hit with a glut of polysilicon-based product and slowing of new panel projects, said CEO Mike Ahern.

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ThinkEquity’s Jonathan Hoopes this morning made an aggressive call on First Solar (FSLR), asserting that a “high-level inventory analysis” of six of the company’s major customers lead him to conclude that there maybe be substantial numbers of First Solar panels sitting in customer warehouses. And he says that they aren’t likely to move out soon, “given weakening economies, lower natural gas prices, higher interest rates and tougher underwriting requirements.”

Hoopes contends that global solar demand headwinds are unlikely to subside for at least the next few quarters. “Take-or-pay contracts are only as good as the counter-party’s willingness and ability to do either,” he notes. Hoopes points out that Q-Cells, on its Dec. 9 conference call, said it will allow a flexible delivery schedule for customers and will also offer discounted prices to help share the burden.”

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Today’s dispatches from the land of the sun reflect caution and opportunity as regards the solar energy technology business. Analyst Gordon L. Johnson with Hapoalim Securities writes in an initiation-of-coverage report on the solar stocks that the credit crunch could hurt solar panel demand because installation of panels is funded up to 70 percent by debt. Johnson’s report, titled “Dancing in the Dark,” specifically recommends an “Underperform” rating on Suntech Power Holdings (STP), with a price target of $16.

Conversely, Lehman–I mean, Barclay’s Capital–research analyst Vishal Shah writes in a note today that he is lowering his estimates for First Solar (FSLR), dropping his 2008 profit per share estimate from $3.78 to $3.60, and from $7.50 to $6 in 2009, and from $11 to $9 in 2010, given reduced expectations for foreign exchange benefit thanks to a “deteriorating Eurozone outlook.”

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As far as I can tell, the sun is operating normally.

But you might think otherwise, judging from this week’s action in solar stocks. The sector, which suffered considerable losses yesterday, today went into freefall, with many names in the sector suffering losses of more than 10 percent. Exactly why investors decided to bail on the stocks today is unclear, but there are a number of factors that appear to be contributing to the current solar scare.

Lehman analyst Vishal Shah wrote a note on the solar sector that, in general, was quite bullish and, in fact, repeated his recommendations on First Solar (FSLR), SunPower (SPWR), Suntech (STP) and JA Solar (JASO). But Shah also noted that most solar companies have provided “somewhat aggressive guidance” for 2009 on the assumption that poly supply would become readily available from the spot market or silicon partners.

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Citigroup’s solar technology analyst Tim Arcuri laid out the argument today for preferring shares of solar panel maker First Solar (FSLR) over those of SunPower (SPWR)–arguing that people get it wrong when they tend to think the former’s stock is more expensive than the latter’s. As measured by next year’s earnings per share (both companies are on a calendar fiscal year), SunPower trades at 26 times, while First Solar trades at 40 times, just going by today’s closing stock prices and the per-share forecast of $6.96 for First Solar and $3.64 for SunPower.

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