First Solar stock has had a solid year, rising by about 33% year-to-date, while Enphase Energy stock has seen a decline of 18% over the same period. First Solar’s financial performance has been strong, with revenues increasing by 45% year-over-year in Q1 2024 and net profit margins surging to over 28%. The company’s efficient thin-film solar panels and focus on large-scale projects have contributed to its success, with demand remaining strong and a backlog of 78.3 GW in bookings.
The current regulatory environment is favorable for U.S.-based solar manufacturers like First Solar, with increased tariffs on solar cells imported from China and tax credits under the U.S. Inflation Reduction Act benefiting the company. The rising demand for artificial intelligence applications is expected to drive increased adoption of solar power, as big tech companies build energy-intensive data centers. First Solar’s focus on utility-scale panels and strong presence in the U.S. position the company well to benefit from this trend.
While FSLR stock has seen strong gains, with a 130% increase from early 2021 to the present, the stock’s performance has been inconsistent. Returns for the stock have varied, underperforming the S&P 500 in 2021 and 2023. In contrast, the Trefis High Quality Portfolio has outperformed the S&P each year over the same period, offering better returns with less risk. The uncertain macroeconomic environment with high oil prices and elevated interest rates could impact FSLR’s performance in the next 12 months.
Multiple long-term positives exist for the solar sector and First Solar, with improvements in the macroeconomic front such as cooler inflation and potential reductions in interest rates by the Federal Reserve in 2024. These factors should benefit renewable energy stocks, making financing of large-scale projects more affordable. However, risks exist, including potential changes to the Inflation Reduction Act-related tax credits and the upcoming U.S. Presidential and Congressional elections in 2024.
There is a neutral stance on First Solar stock, with a $235 price estimate, which aligns with the current market price. The company could face challenges in the future, particularly if there are changes to regulations or a shift in political leadership. Overall, the solar sector presents promising opportunities for growth, with First Solar well-positioned to benefit from the increasing demand for renewable energy sources, particularly in the tech sector.
In conclusion, First Solar’s strong financial performance, focus on utility-scale panels, and favorable regulatory environment contribute to its positive outlook. While there are risks to consider, the long-term prospects for the solar sector remain promising, with potential benefits for companies like First Solar as the demand for renewable energy sources continues to grow.
