TL/DR –
First Solar, Inc. is the only company in the top 10 solar manufacturers that is headquartered in the US and does not manufacture in China. As a result, it is somewhat protected from tariffs imposed on Chinese solar imports. The company has a large demand, with a contracted backlog of 81.8 GW extending through 2030, demonstrating a significant degree of business visibility.
First Solar, Inc. and its Competitive Edge in the US Solar Market
First Solar, Inc. (NASDAQ:FSLR) holds a distinctive position as the only solar manufacturer in the US top 10 that doesn’t manufacture in China, providing a level of tariff protection. As an outcome of tariffs, Chinese solar imports amounted to less than 0.1% in the US according to the Solar Market Insight Report Q4 2023 by SEIA, despite China being the dominant global producer of solar products.
First Solar’s Demand and Backlog
First Solar is experiencing high demand. As of October 31st, 2023, it has a contracted backlog of 81.8 GW through 2030, ensuring company visibility. Its contracted backlog value was $23 billion as of September 30th, 2023, equating to an attractive 29.6 cents per watt. The company’s 2023 net sales guidance is projected to be between $3.4 and $3.6 billion with volume sold guidance of 11.8 GW to 12.3 GW.
Impact of Inflation Reduction Act
The anticipation and implementation of the Inflation Reduction Act (IRA) in August 2022 greatly contributed to First Solar’s stock rally in late 2022 and early 2023 despite rising interest rates. The company’s stock is still largely influenced by the IRA’s status.
First Solar’s Future Outlook
Given a potential normalization of interest rates due to decreasing inflation, solar utility demand could potentially benefit. It’s also crucial to consider the upcoming election’s potential impact on the IRA. Some analysts have voiced concerns about the IRA’s potential repeal, which fosters both demand and supply for renewables. The IRA status will largely depend on which party wins and their intended actions regarding the law.
First Solar continues to have expected production unsold for the years 2026 through 2031, and market speculation on election results could affect its stock. The natural phasing out of the IRA’s solar benefits is also a concern for the market, but near-term election outcomes may have a more significant impact.
Financial Health and Stock Rating
The company has a healthy balance sheet, with a net cash balance of $1.3 billion as of Q3 2023. It currently has a forward PE ratio of 11.14 for 2024, but analysts expect First Solar’s EPS to rise on average to $21.05 for 2025 and $30.85 for 2026. However, due to the IRA’s importance to First Solar’s profits, the stock’s certainty heavily depends on the election results, and it is currently rated as a ‘Hold’.
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