First Solar Earnings: U.S. Capacity Expanding Further, as Expected; Shares Fairly Valued

We maintain our $185 per share fair value estimate for no-moat First Solar FSLR following the company’s second-quarter earnings release. We view the results and commentary as slightly positive, but not enough for us to materially change our assumptions. We view shares as fairly valued.

First Solar’s second-quarter results were headlined by further capacity expansion in the U.S., while financial results were broadly consistent with our expectations. We had already accounted for the U.S. expansion in our forecast following domestic content guidance in May, hence, limited changes to our financial expectations.

First Solar booked 8.9 gigawatts of volume since the last quarter at an average selling price of $0.30 per watt. We view this ASP to be strong, particularly amid falling solar panel prices in recent months. First Solar is largely immune in the near term from the global oversupply of solar panels given its multiyear contracting strategy and U.S. focus, but we believe global module price trends are relevant for customer contracting behavior. In addition, we continue to monitor further U.S. capacity announcements from competitors as the industry continues to digest domestic content guidance that remains slightly opaque. As a reminder, solar projects that are deemed to use domestic content are eligible for a 10% bonus tax credit under the Inflation Reduction Act.

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 are most interested in how First Solar can potentially leverage this windfall to enhance its competitive position via its thin film technology. In particular, we are interested in the development of tandem cells by First Solar and its crystalline silicon competitors as these enter the market later this decade. We look for further details on First Solar’s long-term technology roadmap at is investor day in September.