First Solar: A Leading Player in the Solar Stocks Market

As the global community increasingly embraces renewable energy, First Solar (NASDAQ: FSLR) has distinguished itself as a frontrunner in the solar industry. This is attributed to its robust financial health and consistently profitable operations. The company’s thin-film solar panels, engineered for optimal energy generation, have gained traction as the preferred option for utility-scale solar projects. Currently, First Solar is poised for significant expansion in the U.S., fueled by favorable government subsidies and strategic investments designed to elevate capacity and secure contracts through 2030.

Understanding the Current Position of First Solar

Despite having a market capitalization of $15 billion, First Solar’s stock has experienced a decline of 21% year-to-date. Investors need to consider the company’s vulnerability to economic fluctuations. This was starkly demonstrated during the 2022 Inflation Shock crisis, where its stock value dropped by roughly 25% within just a few quarters. As it stands, with its shares priced around $135, a similar market collapse could see First Solar’s stock decline to approximately $100. For those looking for more stability, the Trefis High-Quality Portfolio offers a potentially lower-risk alternative, boasting returns that exceed 91% since its inception, significantly outperforming the S&P 500.

The Risks of Regulatory Changes

One of the critical factors affecting First Solar’s operations is its reliance on regulatory frameworks. Any shifts in supportive policies, especially those stemming from the Inflation Reduction Act (IRA), could have severe repercussions on its profitability. First Solar has provisioned for an operating income between $1.95 billion and $2.30 billion for FY 2025, largely due to expected benefits from the IRA, including production credits estimated at $1.65 billion to $1.7 billion. This underscores the vital role that government incentives play in First Solar’s financial fabric—a crucial aspect that investors must keep in mind.

Navigating Economic Challenges

The landscape for clean energy stocks is becoming increasingly intricate due to rising inflation concerns, compounded by previous tax and tariff policies from the Trump administration. Additionally, escalating interest rates may further pressure the market and potentially reduce demand for solar products. Our macroeconomic analysis elaborates on how these factors could propel the U.S. economy toward instability or recession, prompting investors to remain vigilant.

Evaluating First Solar’s Resilience

As investors hope for a stable economic environment, it’s crucial to evaluate how First Solar’s stock might perform in the event of another downturn. Our dashboard How Low Can Stocks Go During A Market Crash tracks how major stocks, including First Solar, have previously reacted in times of market stress.

Stock Performance During Previous Crises

Inflation Shock (2022)

• FSLR stock dropped 24.1% from a peak of $84.68 on January 7, 2022, to $64.24 by May 13, 2022, while the S&P 500 saw a decline of 25.4% during the same timeframe.
• Remarkably, First Solar’s stock fully rebounded to its pre-crisis level by July 29, 2022.
• Following this recovery, the stock soared to a high of $300.71 on June 12, 2024 but is currently trading around $133.

Covid Pandemic (2020)

• In 2020, FSLR stock experienced a staggering decline of 49.1%, dropping from $59.32 on February 20 to $30.20 on March 18—this was in stark contrast to the S&P 500’s peak-to-trough decrease of 33.9%.
• Like before, the stock fully recovered by July 14, 2020, showcasing its ability to bounce back after crises.

Conclusion: Weighing Your Investment Choices

Currently, First Solar’s valuation appears appealing, trading at around 11 times last year’s earnings, a notable discount compared to its four-year historical average of 19 times. Nonetheless, this valuation may dwindle if the IRA incentives are rescinded. Even though the company’s revenue surged 27% year-over-year last year, a recent 13% decline in overall bookings raises questions. Thus, investors should contemplate their strategies: will you hold onto First Solar stocks amid potential declines to $110 or even lower? Managing investment during downturns is a challenge. At Trefis, we collaborate with Empirical Asset Management—a Boston-based wealth manager known for its successful asset allocation strategies that have weathered past market downturns. By incorporating the Trefis HQ Portfolio into these asset allocation frameworks, clients are strategically positioned for better returns with reduced risk, as evidenced by our clearly defined performance metrics.