First Solar Earnings: Strong Pricing on New Bookings, but Watch Industry Capacity Expansion

We maintain our $174 fair value estimate for no-moat First Solar FSLR following the company’s first-quarter earnings release. The shares were trading 13% lower at the time of writing, which we view as attributable to high expectations (the stock is up 178% over the past year). We see the shares as fairly valued following the pullback.

First Solar’s first-quarter results were largely uneventful, with the company maintaining its full-year guidance. Our focus remains on new booking trends, where pricing was strong ($0.318 per watt), albeit on light volume (4.8 gigawatts). First Solar is now sold out of its available capacity through 2026.

Among the most important items to watch in the months ahead is U.S. solar manufacturing capacity expansion by First Solar’s crystalline silicon competitors. We count over 45 gigawatts of expected future module capacity following a wave of announcements in recent months, which could send the U.S. market into an oversupply situation in the back half of the decade.

Upcoming clarity on U.S. policy with regard to achieving domestic content thresholds for solar panel manufacturing will likely affect the industry’s and First Solar’s capacity plans. The key question is whether final module assembly alone will qualify for domestic content tax credit adders, or if domestic solar cell manufacturing will be required as well. First Solar has said that further U.S. capacity expansion hinges on this outcome. We expect final guidance to require cell and module manufacturing, supportive of additional First Solar capacity.

Looking longer term, First Solar’s progress against its technology road map is vital to its competitive position. We view increased investment in research and development and acquisitions of early-stage technology as a logical avenue for the forthcoming tax credit windfall. If executed well, this could provide increased differentiation for First Solar, such as tandem solar cells, later this decade.