First Solar Plunges 21.2% in Past 6 Months: How to Play the Stock?

First Solar (FSLR) shares have declined 21.2% in the past six months, underperforming its industry and the S&P 500, driven by weak Q1 2025 results with an 11.4% EPS decrease, manufacturing-related warranty charges ($56M-$100M expected), and new tariffs impacting international operations; while the company is expanding U.S. manufacturing capacity and projects revenue growth of approximately 16% for both 2025 and 2026, analysts have lowered near-term earnings estimates, and the stock is trading at a premium compared to peers.

Analysis

First Solar (FSLR) has experienced a significant stock price decline, falling 21.2% over the past six months, thereby underperforming the Zacks solar industry's 19.3% decrease, the Zacks Oil-Energy sector's 5.3% growth, and the S&P 500's 0.3% gain. This underperformance contrasts with peers like Canadian Solar (CSIQ), which lost 7.8%, and SolarEdge Technologies (SEDG), which gained 15% in the same period. The decline in FSLR's stock appears linked to disappointing first-quarter 2025 results, where earnings per share fell 11.4% year-over-year and operating income slid significantly. Compounding these issues are manufacturing problems with its Series 7 modules, leading to anticipated warranty charges between $56 million and $100 million, and the imposition of new 10% tariffs on modules from key manufacturing regions like Vietnam, India, and Malaysia, which prompted the company to lower its 2025 guidance. Despite these headwinds, First Solar is actively expanding its U.S. manufacturing footprint, with its fourth U.S. facility commencing operations in Q2 2025 and a fifth facility expected in H2 2025, contributing to a planned 4 GW capacity expansion. The company projects revenue growth of 16.3% for 2025 and 16.8% for 2026, with a long-term (three to five years) earnings growth rate estimated at 34.5%. However, near-term Zacks Consensus Estimates for 2025 and 2026 earnings per share have been revised downwards in the past 60 days, reflecting diminished analyst confidence. Furthermore, FSLR shares trade at a premium, with a forward 12-month Price/Sales ratio of 2.92X, substantially higher than the industry average of 1.16X and peers CSIQ (0.10X) and SEDG (0.83X).

Key Decisions for Investors

• Investors should carefully consider First Solar's recent 21.2% stock decline, driven by an 11.4% Q1 EPS drop, substantial upcoming warranty charges estimated between $56 million and $100 million, and new 10% tariffs impacting its 2025 guidance and leading to downward EPS estimate revisions.
• Despite these near-term headwinds, the company's strategic expansion in U.S. manufacturing capacity and robust projected revenue growth of approximately 16% for both 2025 and 2026, coupled with an anticipated long-term earnings growth rate of 34.5%, present a potentially favorable outlook for investors with a long-term horizon.
• Given the stock's current premium forward P/S valuation of 2.92X compared to the industry average of 1.16X, prospective investors may wish to await a more attractive entry point or greater clarity on the mitigation of near-term operational and tariff-related risks, while existing investors might hold their positions in line with the Zacks Rank #3 (Hold), contingent on their alignment with the company's long-term growth prospects.