Citi cuts First Solar stock price target to $236 from $254

On Wednesday, Citi analyst Vikram Bagri adjusted the price target for First Solar stock, traded on (NASDAQ:FSLR), reducing it to $236 from the previous target of $254. Despite this change, the firm maintained a Buy rating on the shares. Currently trading at $147.46, the stock appears undervalued according to InvestingPro analysis. Bagri’s analysis followed First Solar’s recent financial report, which showed revenues slightly above consensus but a miss on gross margin (GM) due to various challenges. The company maintains strong fundamentals with a healthy current ratio of 2.14 and operates with moderate debt levels.

First Solar’s revenue miss was attributed to several factors, including the sale of Investment Tax Credit (IRA) credits, a warranty charge, delays in module shipments, and increased warehousing costs. Despite these challenges, the company has demonstrated solid revenue growth of 21.77% over the last twelve months. The company’s full-year 2025 revenue guidance, which includes 1.4 gigawatts of book and bill, was approximately 1% above consensus but aligned with Citi’s estimates. However, the guidance for gross margin in FY25 was set at around 47%, compared to the current LTM gross margin of 46.54%, and lower than the approximately 54% gross margin projected during the analyst day. This decrease is largely due to an anticipated rise in the total cost per watt to approximately 24 cents. For deeper insights into First Solar’s financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis and additional metrics.

The increase in cost per watt is expected to stem from several factors: warehousing costs, underutilization of capacity, higher freight charges, and the manufacturing costs associated with producing India volumes for the U.S. market. Additionally, a 1-gigawatt reduction in production from facilities in Malaysia and Vietnam, as well as the impact of tariffs, contribute to the higher costs.

Bagri noted that the issues with the Series 7 module have been resolved for current production, with no changes to the potential warranty loss. Citi anticipates a muted market reaction to the news. The concerns around revenue guidance, warranty issues, and the impact of tariffs were addressed in the report. These were balanced by the company’s ability to secure volumes in the year, despite demand and policy risks in the current environment, and the earnings miss in the fourth quarter.

In other recent news, First Solar Inc . reported its fourth-quarter 2024 earnings, missing analyst expectations on earnings per share (EPS) but exceeding revenue forecasts. The company posted an EPS of $3.65, falling short of the anticipated $4.83, while revenue reached $1.5 billion, surpassing the forecasted $1.49 billion. Despite the EPS miss, First Solar demonstrated robust growth over the past year, with a 27% increase in net sales and a 55% rise in diluted EPS from 2023. The company has provided optimistic guidance for 2025, projecting EPS between $17 and $20 and net sales of $5.3 billion to $5.8 billion. Analysts have noted ongoing challenges, including policy uncertainties and international market access, which could impact First Solar’s future growth. Additionally, First Solar plans to increase its manufacturing capacity and explore new technologies, including perovskite and thin-film tandem solar cells. The company’s recent developments also include addressing potential warranty issues with Series 7 modules and maintaining a significant contracted backlog totaling 68.5 gigawatts.

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