First Solar Shares Surge to 14-Year High as Order Backlog Swells
Comment of the Day

March 02 2023

Commentary by Eoin Treacy

First Solar Shares Surge to 14-Year High as Order Backlog Swells

This article from Bloomberg may be of interest to subscribers. Here is a section: 

The surging demand comes as the company is poised to benefit from the Inflation Reduction Act, the landmark climate bill signed last year by President Joe Biden that subsidizes domestic manufacturing. Even before the bill passed, First Solar saw strong demand for its modules. It has since announced a new factory in Alabama and Chief Executive Officer Mark Widmar indicated on an earnings call that further expansion is possible.

The years-long backlog of orders caught the attention of analysts and investors. Goldman Sachs Group Inc. analyst Brian Lee boosted the price target on the stock to a Wall Street-high of $260 from $231 on Wednesday, noting the company is “booking well into the 2nd half of the decade at this point.”

The US is expected to significantly boost its reliance on solar power in its push to slash carbon emissions. First Solar, the country’s biggest panel maker, has focused on dominating that market.

Eoin Treacy's view

Solar stocks tend to be very interest rate sensitive because most residential business plans involve no upfront costs. That generally means the installer has to carry the cost of the panels until cashflows catch up. The business model worked wonderfully during the low interest rate environment and has been challenging over the last year as rate ramped higher.
The Inflation Reduction Act changes the calculus somewhat because it introduces subsidies to defray higher interest costs. First Solar is clear beneficiary and continues to lead on the upside.
Sunrun, as an installer will likely need to wait for rates to come down.

SolarEdge as an inverter manufacturer is firming within its range as it is more finely attuned to volumes of panels moved. 

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