First Solar: Analyst Day Highlights Robust Near-Term Profitability, Long-Term Technology Road Map

We maintain our $185 fair value estimate for no-moat First Solar FSLR after attending the company’s analyst day in Perrysburg, Ohio. We view the shares as fairly valued.

First Solar’s first analyst day in nearly six years focused on providing financial guidance over the next few years and long-term technology road map optionality. The company is poised to achieve unprecedented levels of profitability through the middle of this decade. It provided a high level of transparency on financial expectations through 2026 as its forward contracting strategy offers high visibility into the next several years. In general, profitability metrics were above our expectations, including gross margin (excluding manufacturing credits) approaching 28%-30% in 2026 versus our expectation of 22%. In addition, expected operating leverage is better than we anticipated. These benefits are largely offset by adjusting our timeline for the phasedown in U.S. manufacturing credits, so our fair value estimate is unchanged.

The event also focused on the company’s long-term technology road map. Solar panel technology is likely to see an evolution to tandem cells toward the end of this decade. Here, we see the impacts to First Solar’s competitive position as too early to call. While the company emphasized that tandem technology is likely to utilize some form of thin-film technology, it could be outside of First Solar’s core cadmium telluride know-how (perovskites, CIGS). In addition, we are mindful of the capital spending this transition may require as well as the need for acquisitions to acquire expertise in adjacent areas (see the recent Evolar acquisition). We view long-term capital investment associated with the technology road map as well as management wanting to retain the best balance sheet in the industry as part of the reason that First Solar was reluctant to commit to return of capital in the years to come despite record profitability.