First Solar Stock Set To Surge To Pre-Covid Peak Of $57?

by Trefis Team
-42.63%
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Trefis
FSLR
First Solar
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Comparing the trend in First Solar stock (NASDAQ: FSLR) over recent months with its performance during and after the Great Recession of 2008, we believe that the stock can potentially gain around 20% once fears surrounding the coronavirus outbreak subside, to touch pre-crisis highs of around $57, from current levels of around $46.

A detailed comparison of First Solar’s performance against the S&P 500 is available in our interactive dashboard analysis, 20% Gain Possible For First Solar Stock Post-Covid?, In 2008 It Lost 16.7% And Then Gained 28.0%

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. FSLR stock lost 42% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of coronavirus cases outside China fueled concerns of a global economic slowdown. Notably though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 31% over recent weeks (vs. about 32% gain in the S&P 500) to its current level of $46.50.

 

First Solar’s Stock Dropped Sharply Because The Situation On The Ground Has Changed

The ongoing crisis and the resulting lockdowns have had a significant impact on the solar industry, as installing new solar modules and systems is just not a priority for people at the present time. The sharp drop in demand for solar panels has hurt the demand for First Solar’s solar products, thereby negatively impacting the company’s sales.

We believe First Solar’s Q2 results will confirm this reality with a drop in revenue across all segments. Signs of coronavirus containment aren’t clear, and by the Q2 earnings in July, it’s likely that FSLR stock, along with the broader market, may see another round of sell-offs when results confirm palpable reality.

 

But First Solar Stock Witnessed Something Similar During The 2008 Downturn

We see FSLR stock declined from levels of around $127 in October 2007 (the pre-crisis S&P peak) to roughly $106 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 17% of its value from the S&P’s approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.
However, FSLR recovered strongly post the 2008 crisis to about $135 in early 2010 – rising by 28% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

 

Will First Solar’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that FSLR stock fell 42% from the market peak on February 19 to the low on March 23 compared to the 17% decline during the 2008 recession, we believe it can potentially bounce back by about 70% from the low to over $55 once economic conditions begin to show signs of improving. This marks almost a full recovery to the $57 level First Solar stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. Covid-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak impact on a diverse set of companies. The complete set of coronavirus impact and timing analyses is available here.

You can see how Covid-19 could affect First Solar’s solar peer SunPower, in our dashboard How Low Can SunPower Stock Go

 

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