Jefferies raises First Solar target to $157 on House bill impact

Jefferies increased its price target for First Solar to $157 from $127, maintaining a Hold rating, citing the strength of the Foreign Energy Output Credit (FEOC) and potential increased demand due to Anti-Dumping/Countervailing Duties (AD/CVD). While the analyst anticipates increased market share and orders, caution is advised due to uncertainty surrounding FEOC implementation and potential execution challenges related to scaling production and shifting manufacturing, which could impact results in 2025 and 2026, however, other analysts from Goldman Sachs and UBS have given the stock a Buy rating with price targets of $255.

Analysis

Jefferies has revised its price target for First Solar (NASDAQ:FSLR) upwards to $157 from $127, maintaining a Hold rating, primarily driven by the anticipated benefits from the Foreign Energy Output Credit (FEOC) provisions in a recent House bill and potential increased demand due to Anti-Dumping/Countervailing Duties (AD/CVD) endorsed by the International Trade Commission. This legislative environment, including the repeal of section 48E for certain projects, is seen as revitalizing First Solar's market opportunity. The company exhibits strong fundamentals, evidenced by a 19.42% revenue growth and a "GOOD" financial health score from InvestingPro, which also suggests the stock is currently undervalued with a P/E ratio of 13.11. Despite these positives and an analyst target range spanning $100 to $304, Jefferies tempers optimism with caution regarding the uncertain implementation of FEOC, potential execution friction in scaling production, and the complexities of shifting manufacturing to the United States from Southeast Asia, which could negatively impact 2025 and 2026 results before improvements post-2027. The market has not yet fully priced in a potential average selling price (ASP) increase. In contrast, other analysts are more bullish: Goldman Sachs and UBS both maintain Buy ratings with $255 price targets, and Piper Sandler reaffirms an Overweight rating at $205, all citing First Solar's advantageous position from legislative changes and domestic tax credit continuity. Mizuho also sees First Solar as a primary beneficiary of renewable incentives. The potential loss of the 45X tax credit by end-2027, initially a concern, appears mitigated by the House bill's extension through 2031.

Key Decisions for Investors

• Investors should closely monitor the implementation details of the Foreign Energy Output Credit (FEOC) and the impact of Anti-Dumping/Countervailing Duties (AD/CVD), as these legislative outcomes are critical drivers for First Solar's market share and pricing power.
• Carefully evaluate the execution risks associated with First Solar's manufacturing scale-up and reshoring efforts, particularly their potential impact on financial performance in 2025 and 2026, against the company's reported 19.42% revenue growth and positive financial health indicators.
• Acknowledge the divergence in analyst sentiment, with Jefferies' 'Hold' rating and $157 target reflecting near-term uncertainties, while other firms like Goldman Sachs and UBS project significantly higher values based on a more optimistic interpretation of policy benefits and company positioning.
• Consider the stock's current P/E ratio of 13.11 and InvestingPro's assessment of undervaluation, but balance this with the anticipated market volatility and the potential for shifts in average selling prices as policy impacts materialize.