First Solar Surges on Robust Quarter and Record Backlog Amid Renewable Sector Downturn

First Solar’s shares surged on Wednesday following another robust quarter, with the company’s order backlog extending well into the next decade. The stock soared by as much as 9% during the day, ultimately settling about 2% higher.

In the fourth quarter, the company’s performance stood out as follows:

– Net income increased by 30% year over year to $349.2 million, up from $268.3 million.
– Earnings per share reached $3.25, surpassing an LSEG estimate of $3.13.
– Revenue totaled $1.15 billion, slightly below a consensus forecast of $1.31 billion.

Analyst Andrew Percoco of Morgan Stanley noted that while there was a revenue miss, strong margins of 43.3% outperformed consensus estimates of 37.7%. First Solar boasts a record order backlog of 80.1 gigawatts, stretching through the end of the decade, with bookings secured for the next two years.

Revenue slightly missed estimates
Revenue slightly missed estimates, but high margins offset the shortfall.

Despite the solar sector’s significant downturn, First Solar has remained resilient. While the Invesco Solar ETF (TAN) plummeted by 43% over the past year, First Solar’s decline was only 6.2% during the same period. The company’s focus on large, utility-scale projects has shielded it from the adverse effects of high-interest rates, which have heavily impacted the residential solar sector.

JPMorgan analyst Mark Strouse emphasized the company’s extended visibility into margin levels and cash flows, providing investors with a relative haven. JPMorgan set a price target of $226 for the stock, suggesting a 56% upside from Tuesday’s close.

Following First Solar’s quarterly report, Deutsche Bank and Morgan Stanley both raised their price targets. Deutsche projected a 44% rise to $210 per share, while Morgan Stanley anticipated a 69% increase to $245 per share. Deutsche analyst Corinne Blanchard highlighted the company’s clear message of solid growth ahead, with increased capacity and the development of two new US facilities.

Analysts raised price targets
Analysts raised price targets, foreseeing solid growth and increased capacity ahead.

However, there are potential challenges on the horizon, with bookings expected to slow after two strong years. CFO Alexander Bradley noted that First Solar would be “highly selective” with its contracting in 2024 due to uncertainties surrounding the U.S. presidential and congressional elections.

Analysts are concerned that potential changes to tax credits under the Inflation Reduction Act, particularly if Republicans gain unified control of the government, could pose risks for the company. CEO Mark Widmar pointed out the impact of Chinese subsidization and dumping, leading to a decline in cell and module prices in key international markets like India and Europe.

Despite a strong quarter, Goldman Sachs lowered its price target for First Solar to $265 from $275, citing risks such as solar module oversupply and potential changes to U.S. tax credits.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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