First Solar: Is This Solar Stock Overvalued? Investment Guide for 2025

First Solar, Inc. is powering the future of clean energy with its cutting-edge thin-film solar technology, riding the wave of U.S. policy support like the Inflation Reduction Act. But with its stock surging 44% in just 30 days, is now the time to buy, or are investors chasing an overvalued opportunity? Dive into our detailed forecast to uncover First Solar’s growth potential and the best entry points for 2025 and beyond.

Operations

First Solar, Inc. is a leading American manufacturer of thin-film photovoltaic (PV) solar modules, specializing in cadmium telluride (CdTe) technology. Headquartered in Tempe, Arizona, the company focuses on utility-scale solar projects, providing modules for solar power systems primarily in the U.S. market. Its operations span manufacturing, project development, and module sales, with production facilities in the U.S., Malaysia, and Vietnam.

First Solar emphasizes sustainable energy solutions, leveraging its proprietary thin-film technology, which offers cost and efficiency advantages over traditional crystalline silicon panels. The company benefits from U.S. policies like the Inflation Reduction Act (IRA), particularly the Section 45X tax credits, which incentivize domestic clean energy production.

Financial Performance and Ratios

First Solar’s financial performance in Q1 2025 showed resilience amid a challenging market. Key highlights from its Q1 2025 earnings include:

• Revenue: Not explicitly detailed in the provided data, but the company revised its 2025 guidance to account for new tariffs, suggesting stable demand for its U.S.-focused operations.
• Earnings Per Share (EPS): Analysts project a 56.1% EPS improvement for 2025, driven by strong domestic production and tax credit benefits.
• Profitability: The company generates approximately $1 billion in annual profit, reflecting robust margins supported by its cost-effective CdTe technology.
• Valuation Ratios:
  • Price-to-Sales (P/S) Ratio: 3.3, indicating an attractive valuation relative to revenue.
  • Forward Price-to-Earnings (P/E) Ratio: 10.0, suggesting the stock is reasonably priced relative to expected earnings.
• Balance Sheet: First Solar maintains a strong financial position, with a net cash balance and manageable capital expenditures, as noted in its Q1 2025 guidance. These metrics highlight First Solar’s ability to navigate market volatility while capitalizing on policy-driven demand.

First Solar Stock Price Performance

First Solar’s stock (Nasdaq: FSLR) has experienced significant volatility in 2025:

• Year-to-Date (YTD) Performance: Down approximately 28% as of April 8, 2025, reflecting broader market challenges and policy uncertainties.
• Recent Rally: The stock surged 23% on May 13, 2025, and nearly 20% on May 16, 2025, driven by positive developments around IRA tax credits. By mid-May, shares reached $191.60, up 44% over the past 30 days and 54.98% in a month, fueled by analyst upgrades and policy clarity.
• Analyst Sentiment: Wolfe Research upgraded First Solar to Outperform with a $221 price target, and UBS raised its target to $255, citing confidence in the longevity of 45X tax credits through 2028. Goldman Sachs, however, lowered its target to $204 from $235, maintaining a Buy rating. The stock’s recent gains reflect optimism about First Solar’s domestic manufacturing advantage and policy tailwinds, though it remains sensitive to broader market and policy shifts.

Competitive Landscape

First Solar operates in a competitive solar energy market, facing both domestic and international players:

• Key Competitors: Companies like Sunrun Inc. (RUN), Canadian Solar, and JinkoSolar compete in the solar module and installation markets. Sunrun focuses on residential solar, while First Solar dominates utility-scale projects.
• Competitive Advantage: First Solar’s U.S.-centric operations shield it from tariffs impacting competitors reliant on Southeast Asian supply chains. Its CdTe technology offers lower production costs and a smaller carbon footprint compared to crystalline silicon modules.
• Market Challenges: Policy uncertainties, such as potential changes to the IRA or renewable energy incentives post-2024 elections, pose risks. Competitors face similar challenges, but First Solar’s domestic focus provides a relative advantage. The company’s leadership in thin-film technology and strong policy alignment position it well, though it must navigate intensifying global competition and supply chain dynamics.

Investment Insight

We have been closely monitoring this company’s performance for some time, and it is evident that over the past few years, it has consistently generated positive Net cash flows from operating activities. Earnings per share (EPS) growth has been impressive, reflecting robust financial progress. However, Free Cash Flow (FCF) remains negative, though the trend is improving, and it is highly likely that FCF will turn positive in the near future as operational efficiencies strengthen.

The company scores a high 67 on our Investment Scoreboard, signaling strong growth potential and operational quality. Despite this, we remain cautious about initiating an investment at this stage. While the high score underscores the company’s promising outlook, other key metrics suggest the stock is currently overvalued in the market. Notably, the Equity Risk Premium stands at -2.10%, indicating that the stock’s price may not fully align with its risk-adjusted return potential.

Given these factors, we will continue to monitor the company’s operational and financial performance closely. For now, we recommend a wait-and-see approach, as the current valuation does not present an optimal entry point for investors.

First Solar Stock Forecast**

2025–2029 Price Targets: 

Year	MIN Target	MAX Target
2025	39.20	103.16
2026	45.54	119.86
2027	52.91	139.26
2028	61.48	161.80
2029	71.43	188.00

When to buy and Investment Tips

If you decide to invest in this company’s stock now, it’s advisable to wait for a market correction. Purchasing at current levels offers a low likelihood of delivering significant returns in the medium term.

Dividend Policy and Buyback Policy

First Solar does not currently pay a dividend, focusing instead on reinvesting profits into expanding production capacity and technological innovation. There is no mention of an active share buyback program in the provided data, suggesting the company prioritizes growth over direct shareholder returns. This strategy aligns with its capital-intensive operations and long-term focus on scaling U.S. manufacturing to meet rising solar demand.

Latest News and Impact on Company Value

Recent developments have significantly influenced First Solar’s outlook:

• IRA Tax Credit Clarity: A GOP budget deal preserving key clean energy credits, including the 45X tax credits, until 2028 has been a major catalyst. Analysts estimate these credits could contribute $10 billion to First Solar’s earnings, boosting its growth outlook and driving recent stock price surges.
• New Tariffs (April 2025): First Solar revised its 2025 guidance to reflect the impact of new tariffs, which are expected to minimally affect its U.S.-focused operations compared to competitors reliant on imported components. This enhances its competitive edge and supports investor confidence.
• Analyst Upgrades: Upgrades from Wolfe Research and UBS, with price targets of $221 and $255, respectively, reflect growing optimism about First Solar’s ability to capitalize on domestic manufacturing incentives. These upgrades have fueled a 44% stock price increase in 30 days. These factors have bolstered First Solar’s valuation, with its low P/S and forward P/E ratios making it attractive to value investors. The preservation of tax credits and tariff advantages enhance its long-term growth potential, though policy risks remain a concern.

Conclusion

First Solar’s strong fundamentals, policy-driven tailwinds, and leadership in thin-film solar make it a compelling player in the renewable energy sector. However, its current valuation and negative Equity Risk Premium suggest waiting for a market correction to maximize returns. With projected EPS growth of 56.1% in 2025 and tax credit advantages, patient investors could find significant upside by timing their entry wisely.

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*Investment analysis involves scrutinizing over 50 different criteria to assess a company's ability to generate shareholder value. This comprehensive approach includes tracking revenue, profit, equity dynamics, dividend payments, cash flow, debt and financial management, stock price trends, bankruptcy risk, F-Score, and more. These metrics are consolidated into a straightforward Investment Scoreboard, which effectively helps predict future stock price movements.
**Use the price forecast to manage the risk of your investments.