First Solar shares rise as Jefferies initiates with Buy rating

On Tuesday, First Solar Inc . (NASDAQ:FSLR) received a positive outlook from Jefferies, as the firm initiated coverage with a Buy rating and set a price target of $271.00. The investment firm highlighted First Solar's strong position within the utility-scale solar sector, despite facing industry challenges such as project delays related to permitting and interconnection, as well as policy uncertainties.

The analyst pointed out that First Solar is significantly contracted through the year 2027, with 70% of its fiscal year 2027 expected capacity already under contract, which includes robust average selling prices (ASPs). This level of pre-contracted capacity is seen as a testament to the company's solid standing and future revenue predictability.

The report further noted that as the volatility typically associated with election cycles diminishes, it is anticipated that First Solar will start to add more to its backlog in the first half of 2025. This potential for growth in the company's order book was identified as a key factor in the positive rating.

Jefferies' initiation of coverage on First Solar comes at a time when the solar energy sector is navigating through a period of growth tempered by various uncertainties. However, the firm's analysis suggests that First Solar's substantial contracting and pricing power position it well to weather these challenges.

The new price target of $271 represents Jefferies' confidence in the stock's potential and underlines the firm's expectations for First Solar's performance in the market. The coverage transfer to analyst Julien Dumoulin-Smith marks a continuation of Jefferies' focus on the renewable energy sector and its key players.

In other recent news, First Solar, Inc. reported a steady performance in the second quarter of 2024 despite industry-wide challenges. The company reported an increase in net sales to $1 billion, a rise in gross margin to 49%, and an operating income of $373 million.

William Blair initiated coverage on First Solar with a Market Perform rating, citing the company's capacity to increase production and its competitive low-cost thin-film technology. Despite potential volatility due to political factors and subsidy-driven enthusiasm, the firm recognized First Solar's strong position in the solar sector.

In addition to its financial performance, First Solar successfully expanded its production facilities in Ohio and Alabama, with upcoming operations in Louisiana. These recent developments contributed to a favorable outlook for the company. However, it was noted that changes in the sector could significantly affect the company's backlog, production, and tax credits.

Analysts from William Blair expressed caution regarding the potential impact of the PJM auction results on First Solar. Despite these concerns, First Solar's strategic approach and robust contracted backlog have allowed it to maintain its full-year 2024 guidance steady.

InvestingPro Insights

Complementing Jefferies' optimistic assessment, InvestingPro data underscores First Solar's (NASDAQ:FSLR) financial health and market potential. With a robust market capitalization of $22.77 billion and a forward-looking P/E ratio of 18.87, First Solar showcases stability in its valuation. The company's revenue growth is particularly striking, with a 25.88% increase over the last twelve months as of Q2 2024, suggesting a strong demand for its solar products and a positive industry trajectory.

Two InvestingPro Tips that align with the analysis include the fact that First Solar holds more cash than debt, which is a sign of a strong balance sheet and financial flexibility. Additionally, analysts anticipate sales growth in the current year, reinforcing the positive outlook on the company's revenue stream. For those seeking further insights, InvestingPro offers additional tips and metrics on First Solar, which can be found at https://www.investing.com/pro/FSLR.

The data also reveals that First Solar's gross profit margin stands at an impressive 45.78%, indicating efficient cost management and profitability in operations. Moreover, the company's assets are effectively generating returns, with a return on assets of 12.03%. These financial indicators, combined with the fact that First Solar is profitable over the last twelve months, provide a comprehensive picture of the company's strong financial footing and potential for sustained growth.

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