First Solar Earnings: Pricing on Bookings Remains Healthy Despite Global Solar Panel Supply Glut

We maintain our $185 fair value estimate for no-moat First Solar FSLR following the company’s third-quarter results. We view the shares as undervalued after a selloff in recent months on fears of the global solar panel oversupply spreading to the U.S. market.

First Solar’s third-quarter results were relatively quiet. The company maintained much of its 2023 guidance while modestly increasing operating income expectations on slightly lower operating expenses. Our focus remains more on incremental booking activity and less on near-term earnings. Despite a global solar panel market facing severe excess supply, First Solar managed to book 6.8 gigawatts of volume since the last quarter at an average selling price of $0.30 per watt. The firm continues to benefit from its advantaged U.S. position, which constitutes the vast majority of its sales activities, and where selling prices have been largely decoupled from global prices because of trade restrictions on solar panels.

While ASPs remained healthy in the quarter, the company expects booking activity to slow in the coming quarters as customers exercise patience, given First Solar’s sold-out position through 2026. We continue to expect a loosening of the currently tight U.S. supply/demand picture in the coming years as crystalline silicon competitors build out domestic and non-China solar manufacturing capacity. However, we appear to be less bearish than the market; hence our view that the shares are undervalued following the recent selloff.

First Solar remains poised to deliver a windfall in profits in the coming years thanks to domestic manufacturing credits and its leading U.S. position. Looking longer term, we remain interested in how First Solar can potentially leverage this windfall to enhance its competitive position via its thin film technology as solar panel technology shifts to tandem cells later this decade.