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President-elect Donald Trump has not been shy in professing his love for fossil fuel. His adopted “Drill, Baby, Drill” slogan has made it clear that his second regime's energy policies will be headlined by oil, of which the U.S. is now the world's largest producer. Trump believes that to bring down inflation, a decline in energy prices will be key, and an increase in oil production will be effective in doing just that.
Unsurprisingly, given that the returning president has labeled the Inflation Reduction Act (IRA) as part of the “Green New Scam,” his decisive election victory has come as a blow to the renewable energy sector. Shares of the largest clean energy ETF in terms of assets under management (AUM), the iShares Global Clean Energy ETF (ICLN), have dropped more than 8% over the past week, even as broader markets have soared to new record highs.
However, some analysts believe this knee-jerk pullback in the largest domestic solar panel maker could be a prime buying opportunity. Here's a closer look.
About First Solar Stock
Founded in 1999 and based out of Arizona, First Solar (FSLR) manufactures and sells photovoltaic (PV) modules, providing integrated utility-scale PV power plant solutions. It also offers operations and maintenance (O&M) services, positioning itself as a full-service provider for utility-scale solar energy projects. Its unique cadmium telluride (CdTe) technology for PV modules allows for lower production costs and a smaller environmental footprint compared to traditional silicon solar cells, a critical selling point in the competitive solar industry.
Valued at a market cap of $20.8 billion, FSLR stock is up 11.6% on a YTD basis, and has pulled back by a steep 9.4% over the past week in response to the election results. Longer term, FSLR is up 263% over the past five years.
FSLR looks relatively cheap at current prices, with the forward adjusted price/earnings (P/E) ratio of 14.63 representing a 30.6% discount to the clean energy giant's historical average multiple.
Stable Financials
In recent years, First Solar has witnessed steady growth in its revenue and earnings. While revenue has compounded at a rate of 13.62% over the past three years, earnings have expanded at a CAGR of 40.19% in the same period.
For the third quarter, First Solar reported net sales of $887.7 million, up 10.8% from the previous year, but short of expectations. Earnings per share (EPS) rose by 16.4% on a YoY basis to $2.91, missing the consensus estimate of $3.15.
For the nine months ended September 30, 2024, the company reported net cash from operating activities of $407 million, which denoted growth of almost 10x from the previous year's figure of $41.2 million. As cash flow from operating activities remained solid, the company closed the quarter with a cash balance of about $1 billion, which was much higher than its total debt of $582 million. This is certainly a “bright” spot for the company, as operations in the solar sector are highly capital intensive, and efficient debt management is key not only for long-term solvency but also for growing the business in the future.
Strategic Drivers
First Solar’s significant order book is a promising sign for the company’s future. Its backlog added 0.4 GW in new bookings since the last earnings call, bringing the year-to-date total to 4 GW and the overall backlog to 73.3 GW, with orders extending out to 2030—a key factor driving investor optimism.
Operationally, First Solar recently began production at its Alabama factory, while its Louisiana facility remains on track to open in late 2025. The company is targeting 14 GW in U.S. nameplate capacity and 25 GW globally by 2026. This capacity growth aligns well with expected demand tailwinds, as a potentially lower interest rate environment and stabilized global solar panel prices over the next two years could drive increased demand.
Lastly, a significant technological advancement for First Solar is the rollout of its CuRe ("Copper Replacement") technology, which aims to improve solar module durability and efficiency by using copper (HGZ24) for enhanced stability and cost efficiency. Initial phased production of CuRe modules began at an Ohio facility in Q3, with plans to deploy 0.4 GW by Q1 2025 and full-scale adoption anticipated by year-end 2025 if field tests are successful.
The company is also advancing perovskite development at its Ohio location and actively defending its intellectual property, including a recent legal victory in China to uphold its TOPCon patent, as it pursues cases against alleged patent infringements.
What's the Long-Term Growth Forecast for FSLR?
Despite the headline-grabbing campaign rhetoric around clean energy, the market for renewables is set to keep growing over the next decade. For instance, this report projects that the global solar power market will reach $495.1 billion by 2034 from $253 billion in 2023.
And with increased investment in domestic manufacturing, the U.S. could see production of solar PV components expand tenfold by 2026 if all the planned factories are built. Moreover, as the policies outlined in the IRA come into play, Wood Mackenzie projects that the total operating solar capacity will surge from the current 153GW to a staggering 375GW by 2028.
As for First Solar specifically, the company's operations are projected to recover in India in the medium term because there are anti-dumping investigations in progress, meaning Chinese producers will be watched more carefully for how they undercut average market prices.
Analysts Defend FSLR After the Election
“As the dust settles, we think FSLR will emerge a winner,” wrote Wells Fargo analyst Michael Blum amid the post-election solar stock sell-off. He argues that the same domestic manufacturing tax credits that benefit FSLR are likely to survive any attempts at gutting the existing IRA legislation, since they support jobs in GOP districts.
Likewise, Bank of America's Dimple Gosai cited First Solar's “domestic manufacturing base” as a reason to buy any Trump-related weakness in the shares. “In our view, higher tariffs on imported solar panels would diminish competition from Chinese manufacturers, pushing demand towards First Solar’s U.S.-made products,” wrote the firm.
Overall, analysts have an average rating of “Strong Buy” for FSLR stock, with a mean target price of $279.07 - suggesting expected upside potential of roughly 44.2% from current levels. Out of 34 analysts covering the stock, 26 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 7 have a “Hold” rating.
