First Solar stock gains as Mizuho cites policy benefits

On Thursday, Mizuho (NYSE:MFG) Securities highlighted First Solar, Inc. (NASDAQ:FSLR) as the primary beneficiary of the recent legislative changes in renewable incentives. Currently trading at $163.37, with a market capitalization of $17.5 billion, First Solar appears undervalued according to InvestingPro analysis. The House of Representatives has decided to end tech-neutral tax credits, which previously benefited solar, wind, and battery industries, by 2028. This move also accelerates the anti-China policy timeline, which could impact overall demand and pose challenges for the renewable sector.

The analyst from Mizuho noted that while the anti-China policy is generally negative for the industry, First Solar stands out as a winner in the current version of the policy. The company’s strong financial position is evident in its impressive 43.6% gross profit margin and 19.4% revenue growth over the last twelve months. InvestingPro data reveals 10+ additional insights about First Solar’s financial health and growth prospects, available exclusively to subscribers. The House’s decision aligns with the earlier reports this week regarding the House Freedom Caucus’s plans and is consistent with Mizuho’s base case scenario previously outlined in their Investment Risk Assessment (IRA) scenario notes. According to the firm, these legislative changes are not expected to significantly alter the industry’s fundamentals over the next four years.

The newly imposed stricter timeline and language regarding foreign entities of concern, which will be in effect from 2026 to 2028, present a more considerable challenge for the industry. During this week’s CleanPower conference, industry participants discussed the possibility of procuring solar modules and trackers without relying on Chinese components, albeit at a higher cost. However, there are concerns that the industry may face difficulties in sourcing inverters or batteries without Chinese content.

First Solar’s stock performance is likely to be influenced by the company’s unique positioning in light of these policy shifts. Despite a recent 12.2% decline over the past week, the company maintains strong fundamentals with a P/E ratio of 13.7 and operates with moderate debt levels. For deeper insights into First Solar’s valuation and growth prospects, InvestingPro offers comprehensive analysis through its detailed Pro Research Report, available for 1,400+ top US stocks. As the industry adapts to the new legislative environment, First Solar’s ability to navigate the changes without significant reliance on Chinese components could provide it with a competitive edge.

The broader impact on the renewable energy sector will depend on the industry’s ability to adjust to the legislative changes and overcome the challenges associated with sourcing non-Chinese components for essential technologies like inverters and batteries.

In other recent news, First Solar has been the focus of several analyst updates and legislative developments. Goldman Sachs recently raised its price target for First Solar to $255, citing anticipated benefits from potential tariff and policy relief, while maintaining a Buy rating. UBS also increased its price target for First Solar to $255, reflecting optimism over the continuation of the Advanced Manufacturing Production tax credits. On the other hand, Piper Sandler reaffirmed an Overweight rating and a $205 price target, highlighting First Solar’s resilience despite tariff challenges.

BMO Capital Markets has downgraded Sunrun Inc (NASDAQ:RUN). to Underperform and reiterated the same rating for SolarEdge Technologies (NASDAQ:SEDG) and Enphase Energy (NASDAQ:ENPH), following legislative changes that may restrict residential solar tax credits. Despite the legislative uncertainty, BMO maintained an Outperform rating on First Solar, suggesting it remains in a favorable position due to unchanged provisions related to certain duties. Meanwhile, First Solar’s first-quarter results prompted Goldman Sachs to lower its price target to $204, although the firm still holds a Buy rating.

These developments come amid ongoing legislative discussions that could impact the solar industry, with market participants closely monitoring the situation. Investors are particularly attentive to how these legislative changes and analyst updates might influence First Solar’s future performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.