Is First Solar Overvalued?

by Trefis Team
First Solar
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First Solar (NASDAQ: FSLR) stock is up by about 55% year-to-date, driven by strong installations growth in the U.S. utility-scale solar market and the production ramp of its higher-margin Series 6 panels. However, our price estimate for First Solar remains slightly below the market price, at $59 per share, on account of mounting competition and regulatory risks in the solar industry. In this analysis, we take a look at some of the key drivers of First Solar’s revenues (shows key revenue components) and what’s driving our price estimate for the company.

View our interactive analysis First Solar Valuation: Expensive or Cheap?

Step 1: Estimating First Solar’s Revenues

Key Driver 1: Solar Modules

  • Modules revenues declined from about $700 million in 2016 to about $500 million in 2018, as the company scaled-down on its legacy Series 4 module production.
  • We expect the metric to rise over 2019 and 2020 as the production of the next-gen Series 6 modules ramps up.


Key Driver 2: Systems

  • Systems revenues declined over the last 2 years, due to tougher pricing conditions and a lower number of projects.
  • We expect systems revenues to recover to about $2.5 billion by 2020, driven partly by stronger demand in the U.S. market.

1.3 Estimating First Solar’s Total Revenues

Step 2. Estimating First Solar’s EPS

  • First Solar’s earnings trended lower between 2016 and 2018, due to weaker pricing power for its legacy Series 4 panels and lower-value systems sales.
  • We estimate that First Solar’s adjusted earnings per share will grow by about 80% year-over-year in 2019 to $2.43 per share, rising to $2.92 by 2020 driven by higher margins from the Series 6 panels.

Step 3: Arriving At First Solar’s Price Estimate

  • We value First Solar at about 20x its projected 2020 EPS.
  • This translates into a price estimate of about $59 per share.


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