First Solar Sees Strong Growth From Data Center Demand But Faces Policy Uncertainties: Analysts Opine On Q2 Performance

Goldman Sachs analyst Brian Lee reiterated a Buy rating on First Solar, Inc FSLR with a price target of $311, up from $302.

First Solar reported fiscal 2024 second-quarter revenue of $1 billion, above Goldman Sachs estimate and FactSet consensus of $969 million and $940 million, supported by ~3.4GW of shipments (vs. Goldman Sachs estimate of 3.4GW).

The consolidated gross margin of 49.4% came in well above Goldman Sachs’s estimate of 42.7%. The improvement in gross margins drove the large EPS beat as FSLR reported adjusted EPS of $3.25 versus Goldman Sachs estimate and consensus of $2.68 and $2.71.

Looking ahead, the analyst said that First Solar remains in a position of strength to potentially benefit from ongoing uncertainties in the market and secular demand uplift from megatrends such as load growth primarily driven by data center demand.

Lee continues to anticipate policy uncertainties about the November presidential election to be an overhang on the stock in terms of headline risk; however, policy uncertainty in the U.S. tends to be a tailwind for First Solar and will likely be of heightened focus for investors over the coming quarters.

Lastly, as the company continues to make progress on technology, Lee expects incremental ASP adders to be a critical catalyst that could drive ASPs higher in 2025-2028, which would provide an uplift to both revenue and earnings.

Lee projects fiscal 2024 revenue and EPS of $4.44 billion (prior $4.53 billion) and $13.74 (prior $13.64).

RBC analyst Christopher Dendrinos had an Outperform rating with a price target of $315.

Dendrinos noted that First Solar reported a strong earnings beat and affirmed its guideline. However, revenues, net cash, and sales volumes will likely be at the lower end of the guideline due to a customer termination.

Pricing remains solid, but the analyst said near-term political uncertainty is complicating customer decisions and causing some to pause orders. While a Republican sweep does create an elevated risk of an IRA repeal, the analyst flagged the 45X domestic manufacturing tax credit will continue to garner bipartisan support and thinks that the Republican Party’s more aggressive protectionist policies could strengthen First Solar’s competitive position and keep foreign manufacturers from expanding domestically.

Dendrinos projected fiscal 2024 revenue and EPS of $4.43 billion (prior $4.44 billion) and $13.47 (prior $13.37).

KeyBanc analyst Sophie Karp remained Sector Weight, given persistent macro concerns related to pricing and policy trajectory.

Karp said that, with an uncertain policy environment, First Solar saw its bookings slow down.

According to the analyst, the company remained selective, and its customer base became more cautious, given multiple policy uncertainties related to the U.S. elections and tariff proceedings.

Karp projected fiscal 2024 revenue and EPS of $4.6 billion and $13.3.

Piper Sandler analyst Kashy Harrison had an Overweight rating with a price target of $250.

Given recent delivery pricing, First Solar’s order pricing aligned with Harrison’s expectations. However, the lack of meaningful order momentum was disappointing, per the analyst.

He said that order weakness is mainly driven by policy uncertainty, which may disproportionately impact First Solar since the company is booking fiscal 2027 and 2028 orders.

On a positive note, Harrison noted that First Solar highlighted its data center exposure and provided some catalysts that should improve its domestic position over time.

Overall, investors were looking for solid order pricing and momentum but will likely need to wait until the elections have concluded to improve confidence in the long-term trajectory.

Harrison projected fiscal 2024 revenue and EPS of $4.45 billion and $13.50 (prior $13.74).

Oppenheimer analyst Colin Rusch had an Outperform rating with a price target of $326, up from $325.

First Solar delivered strong results while reiterating guidance despite an anticipated 400MW de-booking in the quarter, Rusch noted.

While he said investors are correctly focused on risk to the IRA from a possible Republican sweep and the potential positive impact of import duty level determination in the recent AD/CVD ruling, underlying demand appears to be strong as pricing on new bookings continued higher, including a new U.S. customer supporting a hyperscaler with 0.6GWW project.

The analyst continues to see an upside to power pricing and generation equipment driven by data center demand. He is also encouraged by incremental improvement on Series 7 conversion efficiency, suggesting potential for First Solar to capture nearly $0.02/W in contracted technology adders.

Rusch projected fiscal 2024 revenue and EPS of $4.5 billion and $13.60 (prior $13.65).

Price Action: FSLR shares traded lower by 0.06% at $210.77 at the last check on Wednesday.

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