Is This the Market’s Most Mispriced Clean Energy Stock?

Washington’s Shift Is a Wake-Up Call

At the heart of the recent selloff is a shift in federal energy policy. The U.S. Senate Finance Committee has proposed phasing out solar and wind energy tax credits beginning in 2026. The bill would slash those credits by 60% next year, phasing them out entirely by 2028 – four years earlier than the current 2032 expiry. By contrast, credits for nuclear, hydroelectric, and geothermal energy would be extended through 2036.

This pivot undermines one of solar’s key tailwinds and hits First Solar where it hurts. With 93% of its $4.2 billion in 2024 revenue tied to U.S. projects, First Solar is more exposed than most companies in the industry. Rooftop solar and residential upgrades — markets that drive consumer demand and installation volume — stand to lose support entirely.

---

Fundamentals Tell a Different Story

Despite policy clouds, First Solar’s core business remains robust. Its Q1 2025 results missed top- and bottom-line estimates, with EPS at $1.95 versus $2.50 forecast, and revenue at $844.6 million versus an expected $866.2 million. Yet beneath the headline miss, gross margins improved to 41%, up from 37% in the prior quarter — a signal of strong operational execution.

The company is doubling down on domestic manufacturing and proprietary technology, including its CURE process and cadmium telluride thin-film modules. With a fully integrated supply chain and continued investment in U.S. production capacity, First Solar remains well-positioned for long-term demand, especially as U.S. electricity consumption is forecast to rise sharply.

Valuation: Cheap for a Leader

At around $145, First Solar looks attractively priced. Its P/E ratio sits at just 12.2 – less than half the S&P 500’s 26.9. While its P/S ratio of 3.8 edges above the index’s 3.1, the premium is backed by the company’s stronger growth and profitability.

First Solar’s Revenues have grown considerably over recent years. Revenue has climbed at a 14% CAGR over the past three years – nearly triple the S&P 500’s pace. Over the last 12 months, sales jumped 27%, and quarterly revenue rose 6% year-over-year – rare strength in a cooling market.

Profitability & Balance Sheet Strength

First Solar isn’t just growing – it’s doing so profitably. Its operating margin sits at 33% for the last four quarters, with a net income margin of 31%. Operating cash flow over the past year hit $1.2 billion, translating to an OCF margin of 29%, nearly double the S&P 500’s 14.9%.

The balance sheet is equally strong. Debt totals just $719 million versus a $15 billion market cap, implying a modest 4.7% debt-to-equity ratio. The company also holds $891 million in cash, representing 14.8% of total assets—a liquidity cushion that provides strategic flexibility.

A Weak Spot: Downturn Resilience

First Solar’s key weakness is its vulnerability during market downturns. In the 2022 inflation shock, the stock fell 49.3% versus the S&P 500’s 25.4% drop. Similar patterns emerged during the COVID crash (–49.1% vs. –33.9%) and the 2008 financial crisis (–72% vs. –56.8%). While FSLR often rebounds quickly, its heightened sensitivity to macro shocks makes it a high-volatility bet despite strong fundamentals. Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Bottom Line: A Mispriced Leader?

Despite near-term headwinds, First Solar’s fundamentals remain among the strongest in the clean energy space. Growth, profitability, and financial stability all score high. The company’s only major weakness is its sensitivity to market corrections and policy reversals.

For long-term investors with a tolerance for risk, FSLR stock at $145 looks like a rare opportunity. The market appears to be pricing in worst-case policy scenarios while overlooking the company’s dominant position and margin strength.