Pro Research: Wall Street eyes on First Solar’s bright future

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Pro Research: Wall Street eyes on First Solar's bright future © Reuters

Explore Wall Street’s expert insights with this ProResearch article, which will exclusively be available to InvestingPro subscribers soon. Enhance your investment strategy with ProPicks, our newest product featuring strategies that have outperformed the S&P 500 by up to 700%. This Cyber Monday, enjoy up to 60% off, plus an extra 10% off a 2-year subscription with the code research23, reserved for the first 500 quick subscribers. To ensure ongoing access to valuable content like this, step up your investment game with InvestingPro.

As the renewable energy sector continues to expand, First Solar, Inc. (NASDAQ:) has emerged as a prominent player in the solar industry. With a focus on the manufacture of thin-film solar panels and utility-scale photovoltaic (PV) systems, the company has attracted attention from Wall Street for its strategic positioning and financial performance.

Performance in Different Markets

First Solar has established a solid presence in the utility-scale solar equipment market, particularly in the United States. Analysts have noted the company’s strong execution track record and its resilience to broader economic concerns. Its focus on utility rather than residential solar sets it apart from competitors, insulating it from industry challenges such as soft residential demand and interest rate volatility.

The company’s stock has been performing well, despite fluctuations in the broader market. Analysts have highlighted First Solar’s contracted backlog, which extends through the end of the decade, and full sales out to 2026, providing exceptional visibility compared to its peers.

Product Segments and Details

First Solar specializes in CdTe (cadmium telluride) thin-film modules, known for using less semiconductor material than traditional crystalline silicon modules. The company’s Series 6 and Series 7 technology is anticipated to provide a cost advantage over Asian peers by reducing cost-per-watt and freight costs. Additionally, technological updates, such as the Series 6 Plus Bifacial expected in Q4 2023 and the CuRe semiconductor platform launch in 2024, are set to enhance performance and energy generation.

Competitive Landscape

The competitive landscape for First Solar is one of both opportunity and challenge. The company’s unique position as a significant U.S. producer in the solar module market, coupled with its highly automated manufacturing capabilities, gives it a competitive edge. However, the market is sensitive to higher interest rates and the cost environment, which can impact utility capital expenditure.

Market Trends

The demand for utility-scale solar is on the rise, with analysts projecting a 26% compound annual growth rate (CAGR) from 2022-2026 in the U.S. market. This growth is supported by macro factors such as grid hardening, modernization, electric vehicle penetration, and aging grid replacement.

Regulatory Environment

The regulatory environment has been favorable for First Solar, particularly with the Inflation Reduction Act (IRA) in the United States. The company is poised to benefit from the 45x tax credit under the IRA, which has been factored into earnings estimates. The IRA’s domestic content requirements, set to increase to 50% by 2026, are also expected to benefit the company as the only vertically integrated domestic manufacturer.

Customer Base

First Solar serves a resilient customer base with reaffirmed growth ambitions in renewables. The company’s customer risk pass-through mechanisms and long-term supplier agreements have de-risked approximately 75% of module production costs over a five-year period.

Management and Strategy

First Solar’s management has been praised for its clear financial insights, technology roadmap, and well-defined costs of capacity expansions. The company’s strategy to focus on well-capitalized customers for bookings beyond 2026 is seen as reducing sales growth risk.

External Factors

External factors, such as the geopolitical dynamics between the U.S. and China, could swing in favor of First Solar. The enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) by U.S. Customs and Border Protection may increase, potentially benefiting First Solar’s future bookings.

Upcoming Product Launches

First Solar is expected to focus on technology updates during its Analyst Day, with no new capacity expansions announced. The launch of the CuRe product and Series 7 technology are key upcoming product launches that are anticipated to drive costs below competitors and lead to better-than-expected margin expansion.

Stock Performance

While stock performance details such as the 52-week range are not provided, analysts have noted that First Solar’s stock has experienced a range between $115.66 and $232.00. The stock has been rated positively by various analysts, with price targets suggesting a potential upside based on the company’s prospects and market position.

Analyst Outlooks and Reasonings

Analysts have provided a mix of bullish and bearish perspectives on First Solar. Bullish outlooks are driven by strong bookings, a resilient customer base, healthy utility-scale solar demand, and the anticipated growth in utility capital spending. Bearish perspectives include concerns about falling U.S. module prices, market sensitivity to interest rates, and the potential impact on utility capex.

SWOT Analysis

Strengths:

– Leading position in thin-film solar module manufacturing.

– Strong contracted backlog providing revenue visibility.

– Benefits from domestic content requirements under the IRA.

Weaknesses:

– Potential competition from crystalline silicon (c-Si) technologies.

– Market volatility and policy changes that could impact performance.

– Concerns about the sustainability of long-term module average selling prices (ASPs).

Opportunities:

– Growth in utility-scale solar demand.

– Technological advancements in CuRe and Series 6 Plus Bifacial panels.

– Expansion of manufacturing capacity in the U.S. and India.

Threats:

– Increased U.S. capacity additions by competitors.

– Changes in government policies or incentives.

– Operational execution challenges.

Analysts Targets

– Mizuho Securities: “Buy” rating with a price target of $188.00 (November 20, 2023).

– Goldman Sachs: “Buy on CL” rating (November 08, 2023).

– Citi Research: “Neutral / High Risk” rating with a price target of $200.00 (September 27, 2023).

– Deutsche Bank: “Buy” rating with a price target of $215.00 (October 19, 2023).

– BMO Capital Markets: “Outperform” rating with a price target of $237.00 (September 14, 2023).

– Evercore ISI: “In Line” rating with a price target of $234.00 (September 13, 2023).

– Piper Sandler: “Overweight” rating with a price target of $240.00 (September 11, 2023).

– Barclays Capital Inc.: “Equal Weight” rating with a price target of $230.00 (September 11, 2023).

– KeyBanc Capital Markets: “Sector Weight” rating (September 08, 2023).

– Barclays Capital Inc.: “Overweight” rating with a price target of $224.00 (October 12, 2023).

– Piper Sandler: “Overweight” rating with a price target of $235.00 (November 01, 2023).

– BMO Capital Markets: “Outperform” rating with a price target of $216.00 (November 01, 2023).

– Piper Sandler: “Overweight” rating with a price target of $240.00 (September 11, 2023).

– Deutsche Bank: “BUY” rating with a price target of $235.00 (September 08, 2023).

– Morgan Stanley: “Equal-weight” rating with a price target of $206.00 (September 06, 2023).

– Roth MKM: “Buy” rating with a price target of $230.00 (September 06, 2023).

– Wolfe Research: “Peer Perform” rating (November 01, 2023).

– TD Cowen: “Outperform” rating with a price target of $250.00 (November 01, 2023).

– Roth MKM: “Buy” rating with a price target of $230.00 (November 01, 2023).

– Piper Sandler: “Overweight” rating with a price target of $235.00 (November 01, 2023).

– Oppenheimer: “OUTPERFORM” rating with a price target of $268.00 (November 01, 2023).

– Morgan Stanley: “Equal-weight” rating with a price target of $214.00 (November 01, 2023).

– KeyBanc Capital Markets: “Sector Weight” rating (November 01, 2023).

– Roth MKM: “Buy” rating with a price target of $230.00 (October 18, 2023).

– BMO Capital Markets: “Outperform” rating with a price target of $216.00 (November 01, 2023).

– Morgan Stanley: “Equal-weight” rating with a price target of $214.00 (October 17, 2023).

– Barclays Capital Inc.: “Overweight” rating with a price target of $224.00 (October 12, 2023).

The timeframe used for this analysis spans from September to November 2023.

InvestingPro Insights

As First Solar, Inc. (NASDAQ:FSLR) continues to shine in the renewable energy sector, real-time metrics and InvestingPro Tips offer deeper insights into the company’s financial health and market performance. With a market capitalization of 15.53 billion USD and a forward P/E ratio of 30.81, the company stands out for its accelerating revenue growth, which has expanded by 25.28% over the last twelve months as of Q1 2023.

InvestingPro Tips highlight that First Solar holds more cash than debt on its balance sheet, providing a solid foundation for future growth. Additionally, analysts anticipate sales growth in the current year, with net income also expected to grow. These factors contribute to a positive outlook, despite the stock taking a significant hit over the last week, with a 1-week price total return of -9.3%.

For investors seeking a more comprehensive analysis, there are an additional 11 InvestingPro Tips available, offering a multifaceted view of First Solar’s financial and market position. With the current special Cyber Monday sale, subscribers can gain access to these valuable insights at a discount of up to 60%, plus an extra 10% off a 2-year InvestingPro+ subscription using the coupon code research23. This offer is an excellent opportunity for investors to enhance their strategy with the full suite of insights from InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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