First Solar’s Stock Is Underperforming, But It’s Still Best-Poised To Beat The Downturn

by Trefis Team
First Solar
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First Solar (NASDAQ:FSLR) has seen its stock price decline by close to 30% since the beginning of this year, falling to levels of around $50 per share currently. The decline has come largely due to broader market trends. Earlier this year, China decided to reduce its incentives for solar projects, in a move that could slash the forecast capacity in the world’s largest solar market by 40%, to 28.8 GW from 48 GW this year, causing pricing and demand for solar products to decline. Moreover, demand in the U.S. could also remain mixed as the surge in project activity in late 2017, ahead of the U.S. solar import tariffs imposed in early 2018, pulled forward some demand. Although First Solar benefited from these regulations, with its panels being exempt from tariffs, a weaker outlook could still be weighing on the company. In Q2 2018, U.S. solar PV installations declined by 9% year-over-year. Moreover, the broader political situation in the U.S. also remains unfavorable, with the Republican Party – which is generally less in favor of government incentives for renewable energy – in control of both the White House and Congress.

We have created an interactive dashboard analysis on what to expect from First Solar for 2018. You can modify the key drivers to arrive at your own forecasts and valuation for the company.

Why First Solar Will Recover In The Near Term

Despite the headwinds, we believe that First Solar remains better poised to deal with the current market challenges. The company has taken advantage of the U.S. tariff imposition and built up multiple years of bookings backlog in recent quarters. As of July 26, the company’s future expected shipments stood at 10.9 GW, implying that almost 80% of its available manufacturing capacity is booked through 2020. First Solar should also be better poised to cope in a decreasing panel pricing environment, considering its shift to the improved Series 6 manufacturing technology. The company’s cost of production for Series 6 modules is as much as 40% below its Series 4 modules, with capital expenditures also well below the company’s legacy modules. The panel’s higher rated power will also allow the company to address a long-standing handicap versus silicon-based panels. Additionally, First Solar’s business of providing operating and maintenance solutions for solar power plants could also help the company. Although sales from this division stood at just about $100 million in 2017, it should provide a stable source of revenue in the longer-term.

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