Should I Buy First Solar (FSLR)? Finance YouTuber Analysis

Travis Hoium advises investors to avoid First Solar due to its heavy reliance on government subsidies for profitability. He notes that without these tax credits, the company would be unprofitable, and its backlog of orders is decreasing despite these advantages. The risk of policy changes affecting subsidies makes the business model unsustainable in the long term.

“So investing in a company that's making all of its profits from subsidies is really dangerous for investors.”

The YouTuber suggests avoiding First Solar because the proposed changes to tax credits are expected to reduce end-market demand for solar panels. This would negatively affect the company's revenue and margins, especially given existing uncertainties about subsidies and import rules that have already impacted its backlog growth.

“For a manufacturer like First Solar or for Nphase or for Solar Edge, that means that end market demand is going to be down for them.”

Travis Hoium advises avoiding First Solar due to significant headwinds not fully priced into the stock. He highlights that over three-quarters of the company's gross profit comes from U.S. government subsidies (Section 45X credits), which are at risk of policy changes. Additionally, the company's sales guidance for 2025 has been significantly cut, backlog is declining while production increases, and tariffs are impacting margins, making the stock appear expensive when subsidies are excluded from earnings.

“If you pull out this 1.65 to $1.7 billion in tax credits, suddenly a vast majority of that net income disappears. Now suddenly the stock is trading for 30 or 40 times earnings. That is a really expensive stock, especially when you're looking at backlog dropping and potentially margins dropping in the future.”

The analyst advises avoiding First Solar due to its heavy reliance on Section 45x tax credits, which account for a significant portion of its operating income and make the stock appear much more expensive without them. Additionally, the company's bookings are declining despite capacity expansion, and increased competition in the US solar market could further erode profitability.

“this is one of the reasons that I'm not as bullish on First Solar at this point and currently at this price is just the Reliance that they have on those subsidies and the fact that that backlog is dropping”

Travis Hoium suggests avoiding First Solar due to concerns about its reliance on Inflation Reduction Act subsidies, which constitute over half of its gross margin and a significant portion of its operating margin. He also points to a shrinking backlog and declining mid-to-late stage booking opportunities, indicating weakening demand, while the company is simultaneously increasing manufacturing capacity. The analyst fears a potential repeat of past industry margin collapses, especially if subsidies diminish and competition for solar panel sales intensifies.

“all these subsidies and the drop in demand should raise alarm bells for First Solar investors and this is a stock that I think has gotten the benefit of the doubt for a very long time but may not deserve it based on the numbers that we're seeing today”

The analyst suggests avoiding First Solar due to its high valuation, particularly when considering the significant portion of its earnings derived from government subsidies. If these subsidies are reduced or eliminated, the company's P/E multiple would drastically increase, making it less attractive.

“First Solar as I'm recording is trading for almost six times sales their Enterprise Value is almost six times their sales yes their PE multiple looks really good at 18 but I talked about earlier about 2/3 that earnings number is coming from subsidies if those subsidies go away suddenly your PE multiple goes up to 55”

Travis Hoium argues that First Solar's stock is overvalued and risky due to its heavy reliance on 45x tax credits, which account for a significant portion of its gross margin and operating income. He highlights that the company's backlog is falling, and its competitive position is diminished outside of North America where subsidies are not a factor. The analyst believes that if these subsidies are reduced or removed, the company's profitability would vanish, and its competitive advantage would erode as more manufacturing capacity comes online, driving down prices and margins for all players.

“I just don't think that's a good position no matter what happens with the election and we don't know from a policy perspective what is going to change over the next couple of years and what's not but typically these subsidies are not something that is going to drive long-term value to investors.”

The analyst advises avoiding First Solar stock due to significant uncertainty surrounding government subsidies, particularly the Inflation Reduction Act. Approximately two-thirds of the company's operating income is derived from these tax credits, making its profitability highly vulnerable to political and policy changes. While the stock's current valuation appears reasonable, removing these subsidies would make it significantly overvalued, and the market has not yet priced in this risk.

“This is not a stock that I'm buying right now because of the uncertainty around these subsidies.”

The analyst is considering selling First Solar due to its high valuation, with a market cap over $30 billion and an Enterprise Value to sales multiple of 8.5 for a manufacturing company. He notes that a significant portion of its gross margin (about 50%) and operating income (about two-thirds) comes from potentially unsustainable tax credits. Historically, solar companies with high valuations and reliance on subsidies have faced challenges from increased competition and changing market dynamics.

“I'm actually considering selling the stock. This is a stock that I've owned for a very long time but at the end of the day this is a manufacturing company this is not a company that's going to scale infinitely in the tech Universe.”

Travis Hoium argues that First Solar is a well-positioned company in the solar industry due to its differentiated thin-film technology, focus on the utility-scale market with long-term contracts, strong balance sheet with significant cash, and benefits from the Inflation Reduction Act. The company has high visibility into future revenue and is expanding its US manufacturing capacity, leading to strong margins and profitability even as competitors struggle.

“First Solar really stands out as one of the differentiated companies in the industry and it always has.”

The YouTuber, a long-term shareholder, plans to hold First Solar due to its strong market position in utility-scale solar, significant capacity expansion plans, and improving margins driven by technological advancements and stable panel prices. While acknowledging that current earnings are inflated by tax credits, he believes the company's operational growth and backlog make it a steady long-term performer.

“as a shareholder I'm just not doing anything I'm just going to allow the company to execute this growth plan year after year”

The YouTuber suggests First Solar as a key beneficiary of the increased demand for renewable energy assets driven by AI data centers. He emphasizes its leadership in utility-scale solar, which he believes will experience significant tailwinds for years to come.

“and First Solar I think the Tailwinds behind the solar industry and especially the utility scale solar industry are going to continue for years and First Solar is absolutely the leader there”

The YouTuber argues that First Solar is well-positioned due to its focus on the utility-scale solar market, which offers longer lead times and less demand volatility compared to residential solar. The company also benefits significantly from the Inflation Reduction Act's tax credits and is expanding manufacturing capacity in the US, leading to expected revenue and earnings growth. Pricing for its products is also holding steady or slightly increasing, contrary to broader market trends.

“The trends are really moving in the right direction for First Solar from both a volume growth perspective and then also a pricing perspective.”

Travis Hoium suggests holding First Solar due to strong Q2 results, including significant gross profit margin improvement and substantial capacity expansion plans. The company benefits from US tax incentives (IRA) and increased demand for utility-scale solar, leading to a large and growing backlog. He sees continued revenue growth and profits for the next few years.

“I don't see any reason to sell shares right now.”

The YouTuber recommends First Solar due to its significant expansion plans, including new facilities in India, Ohio, and Alabama, which are expected to drive future revenue and earnings growth. The company has a substantial backlog and potential bookings, indicating strong demand for its thin-film solar technology, especially in the US where it benefits from subsidies. Despite recent volatility, the company is profitable and has a strong balance sheet.

“I just think there's a lot of momentum behind First Solar the stock may continue to be a little bit volatile but that's to be expected in this industry”

The YouTuber argues that First Solar's significant stock jump following new tax credit guidance is overblown. He believes the primary beneficiaries of the new credits will be solar installers, not panel manufacturers like First Solar, as the company primarily serves utility-scale projects and is already sold out through 2025-2026, limiting its ability to capitalize on increased demand quickly. While there might be some contractual kickers, the direct benefit is questionable.

“I don't actually think that's going to be the stock that's going to get the most benefit from these tax credits and from this rule.”

Travis Hoium believes First Solar is a long-term buy despite recent quarterly volatility. He highlights that full-year guidance remains unchanged, production is set to triple with high-margin new plants, and the company is sold out through 2026, indicating strong demand and market position. While acknowledging the stock is expensive, he suggests paying up for quality in this manufacturing business.

“I still like the future for for solar but this is definitely a long-term game and not a short-term one just because of the volatility but if once you understand how this business Works how the numbers fluctuate quarter to quarter I think it's easier to understand what's going on this quarter and how to think about the business long term First Solar is still looking really well positioned to compete and gain market share in the Solar industry and we see that by selling out products for the next almost three years so really good signs for first solo despite the fact that the stock is coming down today my only hesitation is that this is a very expensive company but sometimes you do have to pay up for Quality especially in a manufacturing business like this so nothing to be alarmed about for First Solar investors that's my takeaway”

The YouTuber is bullish on First Solar due to its unique cadmium telluride thin-film technology, which offers advantages in harsh environments and reliability. The company is rapidly expanding its manufacturing capacity, particularly in the US, to capitalize on government incentives and increasing demand. This expansion is expected to lead to significant revenue growth, improved margins, and strong profitability in the coming years, despite the stock's recent price appreciation.

“a lot to like with First Solar I really like where the company's strategically positioned”

The YouTuber recently sold shares of First Solar, expressing concern that demand for solar panels will not increase as much as investors expect due to rising interest rates. Additionally, the stock had risen sharply, suggesting it was a good time to take profits on a company facing headwinds from higher interest rates.

“I recently sold some shares of First Solar because I'm worried the demand for solar panels is not going to be increasing and quite the way that in that investors expect because of these Rising interest rates plus the stock had risen sharply over the last few months so I think it might be time to take some profits on companies like that”

Travis Hoium is bullish on First Solar due to its strategic position in the growing solar market, especially with increased US manufacturing incentives. He highlights the company's expanding capacity, strong backlog with improved pricing power, and robust balance sheet which allows it to capitalize on opportunities like the Inflation Reduction Act. He expects significant bottom-line improvement starting in 2023 as operating leverage takes effect.

“I want to dig into why First Solar has been such a great performer and why this is a stock I'm still bullish on long term.”

The analyst, a long-time holder, suggests First Solar is a good long-term hold. The company is set to double production in the next 2-3 years, with significant expansion in the US, benefiting from the Inflation Reduction Act. As the primary US solar panel manufacturer, it is well-positioned to capitalize on growing demand and government subsidies, with potential expansion into residential solar.

“I think over the next five to ten years this is going to still be a great place to be in the solar and solar industry”

Travis Hoium recommends First Solar due to its differentiated thin-film technology, focus on the US market, and manufacturing expansion plans, which position it to benefit from subsidies. He notes its strong cash balance and operational efficiency, expecting production capacity to double in the coming years, leading to profitable growth despite its current valuation.

“What I really like about this company is that they're well positioned both with their technology and where they're building Manufacturing in the US they're going to benefit from some of the subsidies that are coming down the line.”

The analyst views First Solar as attractive due to its strong balance sheet with significant cash reserves, which will fund future expansion. The company's backlog has more than doubled, and new manufacturing capacity is being added. Additionally, the Inflation Reduction Act provides subsidies for US manufacturing and an investment tax credit for solar developers, both of which benefit First Solar.

“add all of this up and i think first solar stocks is still really attractive right now”

The YouTuber recommends First Solar as a leader in thin-film solar panels, highlighting its strong balance sheet, profitability, and plans to double production. He also expects the company to benefit significantly from the Inflation Reduction Act's subsidies for US manufacturing and solar plant construction.

“First Solar is a clear leader making thin film solar panels they have a great balance sheet they're profitable and they're double doubling production over the next three years they should also have great tailwinds from the inflation reduction act.”

The analyst recommends First Solar (FSLR) as the only US-headquartered solar technology and manufacturing company, benefiting from domestic production incentives. It has significant booking opportunities and is expected to maintain 20-21% annual revenue growth, with earnings potentially reaching $22 per share, leading to a low forward P/E of around 10. Despite a higher price-to-sales ratio, its valuation is considered attractive given its growth prospects.

“So I think this one could go up double and it would still be within that range that it's traded at over the last uh over the last year as far as these valuation metrics.”

First Solar is highlighted as a 'crash resistant' stock with a significant upside to analyst targets. Despite industry challenges, the solar market is expected to grow, and First Solar, as a market leader with a healthy order backlog, is well-positioned to gain market share.

“Shares of First Solar, ticker FSLR, here with a $250 price target by analysts, which would be more than double the current price. While First Solar is down 31% year-to- date, it's only down 5% since that tariff crash started in March because it's one of the tariff resistant groups I talked about in Monday's video.”

The analyst recommends First Solar due to its position as a market leader in solar energy, benefiting from new tariffs against China which reduce competition. The company has a strong order backlog, is cash flow positive, and is expected to see significant revenue and earnings growth, making it attractive despite industry bankruptcies.

“First Solar has an opportunity to grab that market share as those other companies bankrupt. It's already the market leader with an estimated 21% share of the industry revenue according to Ibis World and a healthy backlog of orders extending through the next six years.”

The YouTuber suggests First Solar as a buy, despite recent industry struggles, because it is a market leader in the solar energy sector with 21% market share and a substantial backlog of projects. The company is expanding its facilities, remains earnings positive, and has a strong cash position, making its current valuation of 7x price-to-sales attractive given its 30% average growth rate.

“First Solar has an opportunity to grab market share it's already the market leader with an estimated 21% of the industry Revenue according to Ibis world and a healthy backlog of 75 gigawatts extending through the next 6 years.”

The YouTuber suggests First Solar as a buy, noting it's down 15% over the last year. He highlights Wall Street's average price target of $225, representing a 49% upside, and points to booming electricity demand from data centers and AI as a catalyst for solar stocks.

“Wall Street still has an average price target of $225 a share Which is 49% higher than the current price so there is an element of bottom fishing here but also a reason to look closer at the stock the demand for electricity is booming from data centers running artificial intelligence and crypto and that could support solar stocks as they bounce off of this bottom.”

The YouTuber advises buying First Solar, citing the strong tailwinds from the renewable energy and solar future, particularly driven by the Inflation Reduction Act. He notes the company's expansion with a new US factory, significant volume growth, and its ability to maintain a strong operating margin despite rapid sales growth, suggesting it's undervalued at three times this year's expected sales and could reach $480.

“Shares her trade for just three times on a price to sales for this year's expected sales basis here it says five times price to sales basis that is on the trailing 12 months but this stock is growing sales so fast it is now trading for just three times this year's expected sales.”