First Solar jumps on strong quarter, record backlog in rare bright spot for beaten-down renewable sector

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A solar field is seen on site at First Solar in Perrysburg, Ohio July 8, 2022. Picture taken with drone. 
Megan Jelinger | Reuters

First Solar shares jumped Wednesday after reporting another solid quarter, with the company booked solid through 2026 and an order backlog that stretches into the end of the decade.

The stock traded as much as 9% higher on the day. It was last up about 2%.

Here’s how the company did in the fourth quarter:

  • Net income rose 30% year over year to $349.2 million from $268.3 million
  • Earnings per share of $3.25 beat an LSEG estimate of $3.13
  • Revenue of $1.15 billion was slightly below a consensus forecast of $1.31 billion

Morgan Stanley analyst Andrew Percoco said the revenue miss was more than offset by strong margins of 43.3%, compared to consensus estimates of 37.7%.

First Solar has a record order backlog of 80.1 gigawatts stretching through the end of the decade with the company completely booked through the next two years.

First Solar is one of the few companies that has weathered the sharp downturn in the solar sector. While the Invesco Solar ETF (TAN) has plummeted 43% over the past 12 months, First Solar is down 6.2% over the same period.

High interest rates pummeled the highly leveraged residential solar sector, but First Solar’s focus on large, utility-scale projects has insulated the company from the macroeconomic headwinds.

“We continue to believe FSLRs extended visibility into margin levels and cash flows provides a relative safe haven for investors,” JPMorgan analyst Mark Strouse told clients in a note. JPMorgan has a price target of $226 for the stock, implying about 56% upside from Tuesday’s close.

Deutsche Bank and Morgan Stanley raised their price targets on the back of First Solar’s quarterly report. Deutsche sees First Solar rising to 44% to $210 per share, while Morgan Stanley is expects upside of 69% to $245 per share.

“The company message is clear and loud – solid growth ahead, with increased capacity coming online and two new US facilities being built up,” Deutsche analyst Corinne Blanchard told clients Wednesday.

“FSLR is utility exposed, and therefore we believe isolated from the current ongoing challenges for the rest of the solar space,” Blanchard wrote. “The company also has a solid balance sheet, therefore reducing macro related headwinds.”

But there are potential headwinds on the horizon with bookings expected to slow after two bumper years. CFO Alexander Bradley told analysts on the company’s earnings call that First Solar will be “highly selective” with its contracting in 2024 as U.S. presidential and congressional elections later this year create uncertainty for the renewable sector.

Analysts are worried that Republicans might seek to weaken or repeal tax credits under the Inflation Reduction Act if they win unified control of government.

And CEO Mark Widmar told analysts that Chinese subsidization and dumping has led to a collapse in cell and module in key international markets such as India and Europe.

Goldman Sachs lowered its price target for First Solar to $265 from $275 prior despite the company’s strong quarter. The investment bank said solar module oversupply and potential changes to U.S. tax credits are key risks for First Solar moving forward.

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