First Solar: Buy-Rated with $190 Price Target Despite Emerging Policy Risks
- Trevor Carnovsky
- Mar 31
- 5 min read
Updated: 7 days ago
Company Background:
First Solar, a leading U.S. solar company based in Tempe, Arizona, was founded by Harold McMaster on November 29, 1984, and went public through IPO in 2006. The company produces thin-film photovoltaic solar panels, fueled by a unique compound called Cadmium Telluride. These panels promise to be more energy efficient, scalable, and cheaper than traditional solar panels, which utilize Crystalline Silicon as a key component to generate energy using the sun. First Solar represents 45% of thin-film solar panels globally and 40% of solar panel industry revenue in the United States.
Introducing the Inflation Reduction Act:
On August 16, 2022, the Biden Administration signed the Inflation Reduction Act (IRA) into law, introducing varying tax benefits for companies producing renewable energy. First Solar has benefitted significantly from the 45X Tax Credits from the IRA, which allowed them to collect and sell these tax credits for .95 cents on the dollar, a 5% discount from their face value, while in 2023 they received $659.7 Million for these tax credits from the Fin Tech company Fiserv (FI). First Solar was able to capitalize on the tax credits again in 2024, selling them to Visa (V) for cash proceeds of $818.6 million. Looking at the company's guidance for 2025, they forecast:
$1.65-1.7 billion in tax credits; contributing to revenues of $5.3-5.8 billion (up to a 38% increase from 2024)
Gross margins between 42-52%, from 2024’s 44% gross margins
Operating margin to $1.9-2.3 billion, from $1.4 billion in 2024 (As much as a 64% increase YOY)
These tax credits boast a significant benefit for First Solar. However, under the Trump Administration, there has been uncertainty surrounding the status of the IRA and its beneficiaries.
From Backlash to Benefit:
The Republican Party has been vocal regarding its opposition to the Inflation Reduction Act since it was signed into law, stating it is unlikely to decrease inflation and is more likely to exacerbate it. Current President Donald Trump scrutinized the IRA on several occasions during his presidential campaign. This uncertainty led investors to flee from First Solar stock, causing a 41% drop since November 5th, 2024, when Trump was elected as the next U.S. President. Ironically, the Inflation Reduction Act has disproportionately impacted Republican-leaning states, driving project development, job creation, and economic growth, as shown in the image below.
Despite this positive development on Monday, January 20th, 2025, President Trump signed an executive order to pause all disbursements of IRA funds, giving federal agencies 90 days (about 3 months) to review the Law and submit spending restructuring recommendations. In the meantime, several congressmen have spoken out against cutting the Law, including over 20 house Republicans who signed a letter advocating to keep the Law intact. Republican Andrew Garbarino, an advocate for the Inflation Reduction Act, who worked to organize the letter with over 20 Republican congressmen, stated, “We have 20-plus members saying, ‘Don’t just think you can repeal these things and have our support.” The congressmen who signed this letter insist the IRA is helping to create the American economic activity Trump has been pleading for since his campaign while increasing U.S. energy output.
Why Keep the Inflation Reduction Act Intact?
According to Forbes, since its inception, the IRA is estimated to have created 750 projects and 400,000 new jobs and attracted over $600 billion (about $1,800 per person in the US) in private investments. Providing an economic boost and increasing the U.S. energy output capabilities. There are also risks related to cutting the act, which can lead to projects and investments that were previously incentivized by the tax credits coming to a screeching halt, causing an excess waste of government funding, which would result in:
A loss of about 790,000 jobs in 2030
A hit to GDP of around $190 billion (about $580 per person in the US) in 2035
A sharp $32 billion (about $98 per person in the US) increase in energy costs over the next 10 years
Moving forward, it is possible to see some restructuring of the Act, particularly the benefits geared toward the electric vehicle sector. However, it is unlikely First Solar will see any significant changes to current tax benefits, considering it is a U.S. company, creating jobs in a growing energy sector during a period in which the U.S. seeks to increase domestic investment and expand energy capabilities.
A little on Tariffs:
Some other political concerns relating to First Solar are the threat of tariffs on countries such as Canada, Mexico, and many others. Investors are unsure of the tariff threats and how these tariffs could impact the economy, potentially leading to higher inflation, which has been reflected in the equity markets recently, in the S&P 500's 6% drop this month. Rest assured, most of First Solar’s raw materials are sourced from the U.S. this includes the glass and steel it requires to produce their panels. Cadmium Telluride is sourced from the U.S., Canada, Germany, China, and the Philippines. In addition, the company is also protected from solar panel production coming out of China as the U.S. has imposed a 50% tariff on Chinese-produced panels, making imports of these solar panels very unlikely to occur and decreasing domestic competition for the company.
A Bright Opportunity Below Fair Value
At $126 per share, the company sells at a significant discount. Based on the above reasoning and the valuation methods I have used, I am giving First Solar a buy rating with a price target of $190 per share. The valuation models used were Discounted Cash Flow (DCF), EV to EBITDA, PE Multiple, and Price to Cashflow. To value the company using the DCF model, I used a Long-Term Growth Rate of 4% and calculated a Weighted Average Cost of Capital (WACC) of 11.53%, determining the company is undervalued by 52%. For the rest of the valuation multiples, I used First Solar's Peer NEXTracker (NXT) to value the company. Each multiple displayed First Solar is significantly undervalued, as shown below:
EV to EBITDA – 38% Undervalued
PE Multiple – 18% Undervalued
Price to Cash Flow – 29% Undervalued
For further questions regarding the valuation process, please reference the Excel Spreadsheet below.
References
Technology, E. I. P. and, & Maracci, S. (2025, March 23). 790,000 jobs, $160 billion GDP: Shocking costs of inflation reduction act repeal. Forbes. https://www.forbes.com/sites/energyinnovation/2025/03/23/790000-jobs-160-billion-gdp-the-steep-cost-of-inflation-reduction-act-repeal/
Kurtenbach, E. (2024, December 12). US hikes tariffs on imports of Chinese solar wafers, polysilicon and tungsten products. AP News. https://apnews.com/article/china-us-tariffs-tungsten-solar-a9653d4b14051d78314c2bd8111510e7
First Solar, Inc. - company profile report: IBISWorld. IBISWorld Industry Reports. (n.d.). https://www.ibisworld.com/united-states/company/first-solar-inc/412467/
Magill, K. (2025, January 23). Trump freezes IRA funding. Utility Dive. https://www.utilitydive.com/news/president-trump-inflation-reduction-act-executive-order-ev-mandate/738001/
Siegal, J., & Bikales, J. (n.d.). Politico pro: House Republican support grows for keeping clean energy tax breaks. subscriber.politicopro.com. https://subscriber.politicopro.com/article/2025/03/house-republican-support-grows-for-keeping-clean-energy-tax-breaks-00218126
Swartz/Floodlight, K. E. (2024, September 17). GOP gets 85% of the benefit of climate law. some still hate it. Floodlight. https://floodlightnews.org/gop-gets-85-of-the-benefit/
Ramirez, N. M. (2024, August 15). Republicans can’t help but love Biden’s signature piece of legislation. Rolling Stone. https://www.rollingstone.com/politics/politics-news/republicans-love-biden-inflation-reduction-act-1235081186/
§45x tax credits: A guide for manufacturers (2025). Crux. (n.d.). https://www.cruxclimate.com/insights/45x-tax-credit
Trump aims at Biden’s inflation reduction act: EVS, Clean Energy and manufacturing | Reuters. Reuters. (n.d.). https://www.reuters.com/world/us/trump-aims-bidens-inflation-reduction-act-evs-clean-energy-manufacturing-2024-12-20/
Manufacturing | First Solar. (n.d.). https://www.firstsolar.com/Technology/Manufacturing#:~:text=First%20Solar’s%20investment%20in%20American,industry%20with%20responsible%20recycling%20technology.
Investors, F. S. (2025, February 25). First Solar, inc.. announces Fourth Quarter and full year 2024 financial results and 2025 guidance. Global Press Release & Newswire Distribution Services. https://www.businesswire.com/news/home/20250225031936/en/First-Solar-Inc.-Announces-Fourth-Quarter-and-Full-Year-2024-Financial-Results-and-2025-Guidance
Metal Tech News. (n.d.). First Solar powers new tellurium demand. https://www.metaltechnews.com/story/2022/09/12/critical-minerals-alliances-2022/first-solar-powers-new-tellurium-demand/1082.html
Disclaimer: This is not financial advice; please perform your own research before making financial decisions.
Great read! With the IRA having such a strong impact on First Solar's financials, do you think the current administration's pause on the IRA disbursements could have a lasting impact on the First Solar's valuation? Also, given that the tax credit they receive is a massive revenue driver, have you thought or found any alternative strategies the company might or could pursue to sustain their growth, given the political uncertainty around the IRA? Would love to hear your thoughts!👍