Shares of First Solar climbed Friday following an upgrade to buy from Deutsche Bank. FSLR stock climbed nearly 4% before retreating to more modest gains.
At an analyst presentation Thursday, the company projected that its gross margin would grow from about 42% next year to more than 60% in 2026, helped by the federal Inflation Reduction Act.
As a result, FSLR stock analyst Corinne Blanchard of Deutsche Bank upgraded First Solar to a buy rating from hold. Further, she set a price target 235, implying 30% upside for FSLR stock.
Blanchard said First Solar "delivered what investors have been looking for — a strong 3-year roadmap, with improving numbers and core margins.
"We are now BUY rated on First Solar, encouraged by the robust growth profile over the medium-term, with a solid backlog and strong ASP (average selling price) profile, and incremental US-based volumes coming online within 12-18 months," Blanchard said in a note to clients.
FSLR stock ended the day up 1.5%, to 183.21, on the stock market today.
First Solar: Shining Brighter Than Solar Peers
First Solar is a Tempe, Ariz.-based manufacturer of solar panels. FSLR stock has climbed 20% this year. Investors are anticipating the solar industry will be boosted by subsidies built into the 2022 Inflation Reduction Act.
Further, the U.S. solar industry expects to build a record 32 gigawatts in 2023, up 52% from 2022. That's according to research published yesterday by the Solar Energy Industries Association and research firm Wood Mackenzie.
But it hasn't been all good news for solar stocks. In fact, the 25 stocks tracked by MarketSmith in the Energy-Solar industry group have lost a cumulative 23.9% this year. The group ranks a dismal 196 among the 197 groups tracked by MarketSmith, based on six-month price performance.
Concerns over soft residential demand, equipment pricing and interest rates have created "uncertainty and a cloudy background for the solar industry," Blanchard wrote in the Deutsche Bank report.
But Blanchard added, "We see First Solar as relatively protected from those concerns, as the company has established itself in the niche market of thin film modules, with strong demand ongoing."
FSLR Stock: Expanding Production
Under the IRA, solar projects using equipment made in the United States can qualify for a bonus tax credit worth 10%. That has helped drive demand for U.S.-based First Solar.
The company on July 27 announced plans to spend $1.1 billion to build a fifth U.S. solar factory. In second-quarter earnings published the same day, the company said it had a backlog of 77.8 gigawatts.
FSLR stock climbed about 5% on the day of the announcement, helped by earnings that topped Wall Street's expectations.
According to IBD Stock Checkup, FSLR stock has a middling 68 (out of 99) Composite Rating, a composite of five other fundamental and technical ratings. Its EPS Rating is a stronger 82, helped by earnings growth this year.
