First Solar Is Up 40% YTD, Has Reached Its Ceiling: Analyst Downgrades Stock

KeyBanc analyst Sophie Karp downgraded First Solar, Inc FSLR to Sector Weight from Overweight following recent shares outperformance.
FSLR's shares are up around 40% year-to-date and about 157% Y/Y. Karp believes FSLR trades at 10x 2025 P/E and has found its 'NT ceiling.'
The analyst sees the passage of the Inflation Reduction Act (IRA) and the subsequent capacity expansion announcements as a tailwind for the company.
The analyst estimates the PV-8 value of domestic manufacturing tax credits (AMC) to be $82 per share (or around 40% of the equity value). As per the analyst, excluding AMC, FSLR trades at about 24.5x 2025 earnings ex-AMC, which is close to a historically high level with limited upside potential.
Also Read: Deutsche Bank Downgrades First Solar Amid Expensive Valuations, Says 'Time For Investors To Seek Elsewhere For Greater Risk/Reward'
The analyst acknowledges the potential for further multiple expansion opportunities given the company announces capacity additions at the analyst day or before. She further states that such an announcement would be based on favourable IRS guidance on the applicability of AMC and future attractive supply-demand balance in the 2025-2030 period.
However, Karp believes the U.S. market is moving towards being oversupplied by 2025, given fast capacity additions in Southeast Asia (outside of AD/CVD countries) and increasing capacity disclosures. The analyst sees further capacity additions as a risk to domestic solar manufacturers' pricing and margins (excluding AMC).
Also See: Why Clean Energy Stocks Sunrun And First Solar Are Diverging Premarket Tuesday
Price Action: FSLR shares are trading lower by 0.85% at $217.02 last check Tuesday.

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