Deutsche Bank Downgrades First Solar Amid Expensive Valuations, Says 'Time For Investors To Seek Elsewhere For Greater Risk/Reward'

Deutsche Bank analyst Corinne Blanchard downgraded First Solar Inc FSLR from Buy to Hold and improved the price target from $190 to $230 on Thursday.

The rationale for the call was based on the fact that the stock has climbed significantly in recent months, up 45% year to date and 210% from July 2022 lows, and has now reached an expensive entry position for investors, after crossing the $200 mark.

Blanchard believed more capacity growth might be a good driver for First Solar in the future, with significant upside linked with the announcement. She also added the timing of such an announcement is still unknown.

Deutsche Bank said it is time for investors to seek elsewhere for greater risk/reward, and Enphase Energy ENPH is its top long-term Buy recommendation within the solar industry.

Andrew Percoco of Morgan Stanley also downgraded First Solar from Equal-Weight to Underweight earlier this month.

FSLR Surged More Than 200% Since July 2022 Lows – Chart: TradingView

First Solar Is A Consensus Buy on Wall Street But Valuations Are Not Cheap Anymore

Overall, 42% of analysts that cover First Solar stock recommend it as a Buy, with 15% rating it as a Strong Buy. However, the company's stock is presently trading at $210, which is close to the average analyst price estimate of $213, according to data provided by Koyfin. That is barely a 2% difference, indicating that FSLR may have reached fair valuations. 

First Solar is now selling at roughly 29 times its expected 2023 earnings (forward P/E), which is not particularly cheap when compared to its all-time average of 36 times earnings.

First Solar will release quarterly earnings on April 27, with analysts expecting EPS of 0.95 and revenues of $714 million.