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HomeMarketFirst Solar’s Shining Stock May Dim

First Solar’s Shining Stock May Dim

*** ONE-TIME USE *** First Solar could soon be facing stiffer price competition in solar modules. Above, a First Solar plant.

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Courtesy First Solar

Solar stocks have soared this year on optimism about the impacts of government subsidies for clean energy and expectations for lower interest rates ahead. The
Invesco Solar ETF
(TAN) is up 15% since the start of the year. Among the biggest winners is Arizona-based First Solar (FSLR), the country’s biggest manufacturer of solar modules. The stock has soared 126% in the past year, and 18% just since the start of 2023.

But Bank of America analyst Julien Dumoulin-Smith thinks the stock now has less room to grow. He downgraded First Solar to a Neutral rating with a $195 price target. Shares were down 3% on Thursday to $174.70. Barron’s picked First Solar as one of the big winners in the rise of U.S. renewables in a November story.

The Inflation Reduction Act (IRA) passed by Congress last year gives large tax benefits to solar manufacturers, and First Solar is likely to get more than $8 billion worth of production tax credits, Dumoulin-Smith writes. In addition, the company has benefited from U.S. laws blocking the importation of Chinese solar panels suspected of being made with forced labor. That’s increased demand even more for First Solar’s products. 

But some of those impacts may have run their course, and solar prices are now falling around the world, meaning that First Solar could deal with more price competition. Investors have fewer reasons to buy in at these levels.

“Between the outperformance of the shares and weakness in global solar prices of late, the favorable drivers are largely embedded,” Dumoulin-Smith writes. 

He thinks there are better ways to play solar now.

“All said, while we acknowledge First Solar’s unique exposure to IRA tax credits and its positioning as among the only EPS positive, large, liquid pure-play Cleantech names, we prefer” companies like
Array Technologies
(ARRY), he writes. Array makes solar tracking systems, which allow solar panels to follow the path of the sun.


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