Why First Solar stock remains a raging buy despite Trump's spending bill

Despite recent declines due to proposed subsidy removals in the "One Big Beautiful Bill Act", RBC analysts maintain an "overweight" rating on First Solar (FSLR), citing the resilience of its utility-scale operations, which serve large corporations like Amazon and Meta. Analysts believe these projects are less sensitive to subsidy changes, as energy costs represent a small fraction of overall expenses for data centers; furthermore, the consensus price target of $202 suggests a potential 40% upside, reinforcing the view that the recent pullback represents a buying opportunity given the lack of viable alternatives to solar power.

Analysis

First Solar (FSLR) has experienced a significant stock price decline, falling over 25% from its year-to-date high, following the U.S. Senate's support for a bill proposing the removal of solar subsidies. Despite this market reaction, analyst consensus remains strongly positive, viewing the company as uniquely resilient to the policy shift. This resilience is attributed to First Solar's business model, which is heavily concentrated on utility-scale projects for large corporate clients such as Amazon and Meta Platforms, rather than the residential market. These large-scale projects are reportedly less affected by subsidy changes, as energy constitutes a small fraction of the overall cost for their primary application: powering AI data centers. Experts note that for these multi-billion-dollar customers, an increase in energy from 7% to 9% of total project cost is unlikely to halt development. Furthermore, the demand outlook is bolstered by the lack of viable short-term energy alternatives, with solar plants having a one-year development timeline compared to over a decade for gas or nuclear. This perspective is supported by Wall Street's consensus 'overweight' rating and a mean price target of $202, which implies a potential upside of nearly 40% from current levels.

Key Decisions for Investors

• Consider the recent stock price decline of over 25% as a potential buying opportunity, given that analysts believe the market has overreacted to subsidy news that may not materially impact First Solar's core utility-scale business.
• Monitor capital expenditure plans and energy procurement announcements from large technology companies, as their continued investment in AI data centers serves as the primary and price-inelastic demand driver for FSLR.
• Investors should evaluate positions against the Wall Street consensus price target of $202, which provides a quantitative benchmark for the strong bullish case presented by analysts.
• Acknowledge that while fundamentals appear robust, the stock may face continued volatility from headline risk related to fiscal policy and broader sentiment shifts in the renewable energy sector.