Energy
Wednesday, February 28th, 2024 5:32 pm EDT
Key Points
- First Solar shares surged following a solid quarter, with strong financial performance and a promising outlook:
- Net income increased by 30% year over year to $349.2 million, with earnings per share beating estimates at $3.25.
- Revenue slightly missed consensus forecasts at $1.15 billion but was offset by robust margins of 43.3%, exceeding expectations.
- The company boasts a record order backlog of 80.1 gigawatts extending through the end of the decade, with complete booking for the next two years.
- First Solar’s resilience amidst the solar sector’s downturn sets it apart, with the stock down only 6.2% compared to the Invesco Solar ETF’s 43% decline over the past year.
- Insulated from macroeconomic challenges by focusing on large, utility-scale projects, First Solar offers investors a relative safe haven with extended visibility into margin levels and cash flows.
- Analysts like JPMorgan’s Mark Strouse and firms such as Deutsche Bank and Morgan Stanley raised their price targets, anticipating significant upside for First Solar.
- Despite the positive outlook, potential headwinds loom, with concerns about slowing bookings after two strong years and uncertainty surrounding U.S. renewable energy policies, particularly tax credits.
- CEO Mark Widmar highlighted challenges from Chinese subsidization in international markets, while Goldman Sachs identified solar module oversupply and tax credit changes as key risks moving forward.
First Solar saw a significant surge in its shares following a strong fourth-quarter performance, despite a slight revenue miss. The company reported a 30% year-over-year increase in net income to $349.2 million, with earnings per share surpassing estimates at $3.25. Although revenue fell slightly below consensus forecasts at $1.15 billion, robust margins of 43.3% outpaced expectations, according to Morgan Stanley analyst Andrew Percoco. With a record order backlog of 80.1 gigawatts extending into the next decade and complete booking for the next two years, First Solar has demonstrated resilience amidst the solar sector’s downturn. Unlike the Invesco Solar ETF, which plummeted 43% over the past year, First Solar’s decline stood at 6.2%, attributed to its focus on large, utility-scale projects that shielded it from macroeconomic challenges. Analysts like JPMorgan’s Mark Strouse view First Solar as a relative safe haven for investors due to its margin levels and cash flow visibility, projecting a price target of $226, signaling a potential 56% upside. Deutsche Bank and Morgan Stanley also raised their price targets, anticipating further growth as First Solar expands capacity and constructs new facilities. However, there are concerns about potential headwinds, including a slowdown in bookings and uncertainty surrounding U.S. presidential and congressional elections, which could affect renewable energy policies. Analysts fear Republican control may lead to changes in tax credits, while CEO Mark Widmar highlighted challenges from Chinese subsidization in international markets like India and Europe. Despite a strong quarter, Goldman Sachs lowered its price target to $265 due to oversupply in the solar module market and risks associated with U.S. tax credit adjustments.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/28/first-solar-jumps-on-strong-quarter-record-backlog-in-rare-bright-spot-for-beaten-down-renewable-sector.html
