/Solar%20Panels%20in%20Nature%20Sunny.jpg)
The solar energy industry is on fire, with global solar photovoltaic (PV) capacity additions increasing by almost 50% to a record 510 gigawatts (GW) in 2023, according to the International Energy Agency (IEA). This surge is being fueled by a perfect storm of factors, including a massive 40% drop in solar module prices since the start of the year, thanks to the rapid expansion of solar manufacturing capacity in China, which now dominates over 80% of global module production.
Governments worldwide are also playing a crucial role in driving the adoption of solar energy, setting ambitious renewable energy targets, and offering incentives to accelerate the transition towards a more sustainable future. In the U.S., the Biden administration has taken significant steps to promote clean energy development, further boosting the industry's prospects.
Amidst this booming landscape, First Solar Inc. (FSLR), a leading manufacturer of thin-film solar panels, has emerged as a compelling investment opportunity. The company's innovative technology and strategic initiatives have positioned it as a potential winner in the renewable energy space, with some analysts predicting significant upside for the stock. Read on to discover why FSLR might be the best way to invest in the booming solar energy industry.
Beaten-Down FSLR Looks Cheap Here
Valued at $19.2 billion, U.S.-based First Solar Inc. (FSLR) handles every aspect of the solar energy business, from manufacturing to recycling. FSLR was one of many green energy stocks to come under pressure amid the Fed's rate-hike campaign, as the company largely relies on financing to fund new solar installations.
The stock is down 16% over the last 52 weeks, considerably underperforming the S&P 500 Index ($SPX), which has gained more than 22% in the same time frame. However, with the stock creating a series of higher lows, First Solar's improving fundamentals and attractive valuations make it a stock worth considering at current levels.
Speaking of valuations, First Solar's forward price/earnings ratio sits at just 13.24 - way lower than its 5-year average multiple of 22.3. That depressed P/E suggests the stock is potentially undervalued, as does the EV/EBITDA of 8.78. That marks a discount of more than 50% to First Solar's typical premium.
In its late February Q4 earnings report, First Solar bested Wall Street's expectations with an adjusted quarterly EPS of $3.25, compared to the $3.19 consensus. However, revenue for the period checked in at $1.16 billion, just short of expectations.
Despite the mixed report, FSLR just scored an upgrade at Wells Fargo (WFC) on the strength of its earnings visibility. Analyst Michael Blum raised his rating on First Solar stock from "Equal Weight" to "Overweight," observing that the company's sold-out solar panels through 2026 should provide some relative stability - especially coupled with expected government incentives for the top U.S. solar player.
Blum has a $250 price target on the stock, about 40.8% north of current levels.
What's Driving Growth at First Solar?
First Solar has embarked on an ambitious expansion plan, fortifying its manufacturing capabilities across multiple fronts. Domestically, First Solar recently announced the acquisition of a massive 1.2 million square foot facility in Troy Township, Ohio. This strategic move is aimed at repurposing the facility into a state-of-the-art distribution center, further streamlining the company's supply chain operations and enhancing its ability to meet the growing demand for solar panels across the U.S.
The company has also invested a whopping $1.1 billion in a manufacturing facility in Louisiana, which is expected to commence commercial shipments by the first half of 2026. With a projected nameplate manufacturing capacity of 3.5 gigawatts (GW), this facility will propel First Solar's total capacity in the United States to an impressive 14 GW and a staggering 25 GW worldwide by 2026.
Extending its reach overseas, First Solar has also made significant strides in the Indian market. Earlier this year, the company inaugurated its new facility in Tamil Nadu, marking a significant milestone as the country's first fully vertically integrated solar manufacturing plant. This cutting-edge facility is poised to play a pivotal role in catering to the burgeoning demand for solar energy solutions in the rapidly expanding Indian market.
Analysts Are Bullish on FSLR
The buzz around First Solar is super positive right now, with analysts betting on strong earnings growth and a fairly robust upside for the stock. The company's gearing up to drop its Q1 earnings report on Wednesday, May 1, and analysts are expecting explosive EPS growth of 407% to $2.03 for the quarter.
For the full fiscal year 2024, First Solar is feeling pretty upbeat, with management projecting net sales between $4.4 billion and $4.6 billion, with EPS guidance that's through the roof at $13.00 to $14.00. Analysts have their EPS forecast for FY 2024 set just a little higher than the midpoint of that range, predicting 75% bottom-line growth to $13.55.
Like Wells Fargo, the analyst consensus is pretty bullish on FSLR. Out of 29 analysts throwing out recommendations, a whopping 23 are saying "strong buy," one's going with a "moderate buy," and just a handful - five, to be exact - are playing it cool with a "hold" rating.
Plus, the average target price for First Solar among these analysts is $227.29, which indicates expected upside of 28% from current levels.
The Bottom Line on First Solar Stock
The solar energy scene is heating up, and First Solar (FSLR) is ready for its moment in the sun. With its solid earnings visibility, tempting valuation, and big money flowing into green energy, this solar stock might be a bargain for investors looking to get in on the renewable energy game. As the globe leans hard into clean energy, First Solar's prospects are shining bright.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
