Morningstar

First Solar: Shares Rise on Favorable Import Duty Ruling

Other policy decisions on the horizon will likely have a greater impact on the firm’s long-term outlook.

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Securities in This Article
First Solar Inc
(FSLR)

Key Morningstar Metrics for First Solar

On April 21, the US Commerce Department announced final anti-dumping and countervailing duties against four Southeast Asian countries. The average effective duty rate ranges from 34% on Malaysian imports to over 650% on Cambodia imports.

Why it matters: The four affected countries have historically accounted for a majority of US solar panel and cell imports. Thus, if it is finalized, we expect the ruling to be inflationary for US solar panel prices and a positive for First Solar FSLR, since its capacity is not affected.

  • First Solar shares were up 12% at the time of writing, which we attribute largely to the favorable ruling.
  • Over time, we would expect US solar module imports to diversify to countries unaffected by the ruling, such as India and Indonesia, which have been growing as a share of imports in recent months.

The bottom line: We are maintaining our fair value estimate of $190 per share. We see shares as undervalued under our base case, which assumes domestic manufacturing credits remain in place.

Big picture: While the import duty ruling is favorable for First Solar, we are watching other policy decisions on the horizon that are likely to have a greater impact on the firm’s long-term outlook.

  • Tariffs: 45% of midterm manufacturing capacity is non-US and is affected by the outcome of ongoing tariff discussions. We see the outcome of US tariff policy as playing a role in whether or not the company chooses to invest in next generation solar technology at its Malaysia and Vietnam factories.
  • Domestic manufacturing credits: First Solar receives roughly $2 billion per year in manufacturing credits between now and the end of the decade, comprising a meaningful portion of our valuation. We expect the outcome of these credits to be determined as part of the budget reconciliation process later this year. Our base case remains that the credits remain unaffected, but we acknowledge some uncertainty.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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