First Solar: Buy-Rated with $190 Price Target Despite Emerging Policy Risks

Update: Price target upgraded from $190 to $262 in May 2025 following a strong earnings beat and favorable trade developments. Target reached October 2025. Coverage now closed. See full update →

Company Background

First Solar, based in Tempe, Arizona, was founded by Harold McMaster on November 29, 1984, and went public through an IPO in 2006. The company produces thin-film photovoltaic solar panels using a compound called cadmium telluride (CdTe), which offers higher energy efficiency, better scalability, and lower production costs than the crystalline silicon panels that dominate global solar manufacturing.

First Solar holds 45% of the global thin-film solar panel market and operates a vertically integrated manufacturing footprint spanning the U.S., India, and Vietnam. In the U.S., the company has built a significant domestic manufacturing base with large-scale factories in Ohio, Alabama, and Louisiana, positioning it as one of the few major solar manufacturers producing at scale on American soil. This is a rare distinction in an industry overwhelmingly dominated by Chinese producers.

The Thin-Film Advantage

First Solar's core competitive moat lies in its cadmium telluride (CdTe) thin-film technology. While the vast majority of global solar panels rely on crystalline silicon, First Solar's CdTe panels offer several structural advantages. They perform better in high-heat and high-humidity environments, where silicon panels lose efficiency. They also degrade more slowly over time, delivering more consistent energy output across a panel's 25-to-30-year lifespan.

From a manufacturing perspective, CdTe thin-film panels require less energy and water to produce than silicon-based alternatives, resulting in a smaller carbon footprint per watt. First Solar's vertically integrated supply chain, from raw material sourcing to finished panel production, gives the company tighter cost control and insulates it from the pricing volatility that affects silicon panel makers dependent on Chinese polysilicon supply.

This technology advantage, combined with domestic manufacturing, creates a differentiated product that utility-scale developers increasingly prefer when bidding on large U.S. solar projects, particularly those requiring domestically sourced components.

Policy Tailwinds and Tariff Protections

On August 16, 2022, the Biden Administration signed the Inflation Reduction Act (IRA) into law, introducing tax benefits for companies producing renewable energy. First Solar has benefited significantly from the 45X Tax Credits, which allow the company to collect and sell manufacturing tax credits at $0.95 on the dollar.

• 2023: Received $659.7 million in tax credits (sold to Fiserv)
• 2024: Received $818.6 million in tax credits (sold to Visa)
• 2025 guidance: $1.65-1.7 billion in tax credits expected

The Republican Party has been vocal in opposing the IRA since it was signed into law. This uncertainty led to a 41% drop in First Solar's stock price following the November 5, 2024 presidential election. On January 20, 2025, President Trump signed an executive order to pause all disbursements of IRA funds, giving federal agencies 90 days to review. However, over 20 House Republicans signed a letter advocating keeping the law intact, citing the 750 projects, 400,000 jobs, and over $600 billion in private investment the IRA has generated. It is unlikely First Solar will see significant changes to its tax benefits, considering it is a U.S. company creating domestic manufacturing jobs in a growing energy sector.

Beyond IRA benefits, First Solar is protected by trade policy. Most of its raw materials, including the glass and steel used in panel production, are sourced domestically. The U.S. has also imposed a 50% tariff on Chinese-produced solar panels, effectively eliminating low-cost import competition and reinforcing First Solar's domestic pricing power.

Financials

First Solar's financial trajectory reflects a company in an accelerating growth phase. Revenue has climbed from $3.3 billion in FY2023 to $4.2 billion in FY2024, and management has guided for $5.3-5.8 billion in FY2025, representing up to 38% year-over-year growth. This acceleration is driven by increased panel shipments, higher average selling prices, and growing 45X tax credit monetization.

On the profitability front, First Solar's 2025 guidance calls for gross margins between 42% and 52% and operating income of $1.9-2.3 billion, up to 64% higher than FY2024. These margins are exceptionally strong for a manufacturing business and reflect the structural advantages of CdTe production economics combined with IRA tax credit income. The company's ability to sell tax credits at near-face value to investment-grade buyers like Visa and Fiserv provides a high-margin, recurring revenue stream that is unique among solar manufacturers.

Valuation: DCF Analysis

At $126 per share, First Solar trades at a significant discount to fair value. Based on a multi-model valuation approach spanning DCF, EV/EBITDA, P/E, and P/CF, I am assigning a Buy rating with a price target of $190 per share.

All four valuation methods consistently demonstrate that First Solar is trading well below fair value at current prices.

Risks

• IRA policy reversal: First Solar's earnings are meaningfully tied to 45X manufacturing tax credits. Any revision, phase-out, or repeal of IRA incentives would directly impact profitability and reduce the company's competitive advantage over imported panels.
• Trade policy and Chinese competition: The 50% tariff on Chinese solar panels could be reduced or restructured in future trade negotiations. Chinese silicon manufacturers continue to scale aggressively and reduce costs, so any weakening of tariff protections would reintroduce low-cost competition and erode First Solar's domestic pricing advantage.
• CdTe raw material concentration: Cadmium telluride is a niche material with limited global supply sources. Supply disruptions or price spikes in tellurium could pressure manufacturing costs and margins.
• Factory expansion execution risk: First Solar is investing heavily in new U.S. and international manufacturing capacity. Construction delays, cost overruns, or demand shortfalls could lead to underutilized capacity and lower returns on invested capital.

Conclusion

Despite a sharp post-election selloff driven by IRA uncertainty, First Solar's fundamentals remain compelling. The company's CdTe thin-film technology, vertically integrated domestic manufacturing, and accelerating revenue growth position it as a structural winner in the U.S. solar market. At $126 per share, I view the stock as significantly undervalued and assign a Buy rating with a $190 price target. I will continue monitoring IRA policy developments, factory ramp timelines, revenue growth, and margin trajectory.

Update (May 14, 2025): First Solar surpassed the original $190 price target following a strong earnings beat and the U.S.-China trade pause. Based on continued revenue acceleration, margin expansion, and an improved macro backdrop, the price target has been upgraded to $262 per share. See the full update in Markets March Higher.