Solar panel manufacturers are slated to be major beneficiaries of the Inflation Reduction Act.
Andreas Rentz/Getty ImagesFirst Solar just notched a double upgrade, all thanks to the Democrats’ climate change bill.
Goldman Sachs analyst Brian Lee upgraded First Solar (ticker: FSLR ) stock from Buy to Sell, and boosted his price target to $172 from $60. This is the latest of a series of analyst upgrades of the stock, most of which have been driven by the passage of the Inflation Reduction Act, sweeping legislation that provides nearly $370 billion of funding to clean energy initiatives.
While Lee acknowledges he might be late to the upgrade party , he believes it’s still a worthwhile bet.
“We believe there is still modest upside to what has quickly become a domestic solar manufacturing champion across our coverage,” Lee wrote. “After flowing in benefits from the recent IRA legislation, we still see meaningful upside to consensus estimates in 2023-2024.”
Lee estimated that the combined tax credits for cell and panel manufacturing — 11 cents per watt — account for more than 45% of First Solar’s blended module costs. The company is already taking advantage of the cash influx that will come as a result of the act, and has announced plans to invest $1.2 billion to build a fourth domestic plant in the U.S. and expand its existing manufacturing capacity.
Aside from the tax credits, Lee added that he has a more constructive outlook on the company’s gross margin recovery.
First Solar stock rose 2.3% to $137.91 on Thursday. The shares have gained 58% this year, rising as analyst sentiment has turned bullish. Half of analysts covering the stock now rate it a Buy, while 46% rate it a Hold and 4% a Sell. At the end of June, before the climate bill passed Congress, only 25% of analysts rated it a Buy, while 63% gave it a Hold rating and 12% rated it a Sell.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
