First Solar’s guidance points to major benefits of the Inflation Mitigation Act

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First Solar

Financial forecasts underscore its status as the potential biggest beneficiary of the Anti-Inflation Act, an analyst said on Wednesday as the stock surged higher.

First Solar (Ticker: FSLR), the solar panel maker, reported a loss of 7 cents a share, compared to the consensus analysts were tracking of 17 cents

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but management’s projections caught Wall Street’s attention.

The company forecast net sales of $3.4 billion to $3.6 billion for 2023, slightly above expectations of $3.42 billion. It forecast operating income of between $745 million and $870 million, while analysts were expecting $700 million.

That’s partly because the company expects to receive between $660 million and $710 million in tax credits under the Inflation Reduction Act. The IRA, passed by Congress last year, offers solar manufacturers big tax breaks to incentivize solar projects. Barrons chose First Solar as one of the big winners in the rise of renewable energy in the US in a November story.

Guggenheim analysts, led by Joseph Osha, reiterated a Buy rating on the stock but lowered their price target to $255 from $260. They said the company’s gains underscored its status as the IRA’s potentially largest US beneficiary.

“Investors’ focus was not on fourth-quarter results, but on the outlook the Company has provided for 2023 and beyond, taking into account the significant benefits the IRA is expected to generate for First Solar,” they said.

The impact of tax credits is “dramatic,” they noted, taking First Solar’s overall corporate gross margin to 37% this year and 45% in 2024, compared to 3% last year. As a result, they project annual earnings before interest, taxes, depreciation and amortization of $3.1 billion through 2025, which is more than the company’s revenue last year.

KeyBanc Capital Markets analysts also reiterated their Buy rating and price target of $201, but said the company is clearly awaiting guidance on the IRA section dealing with tax credit eligibility before moving on to its US expansion plans agreed.

They said the company’s own suitability was “fairly assured,” but waiting for clarity on its competitors could help First Solar “adjust” its U.S. investments accordingly.

“Given the strong margin momentum, growth trajectory and remaining IRA-related upside, we believe stocks will respond positively,” they said.

The stock was up more than 13% on Wednesday to $191.50. Shares were up 143% over the past year as of Tuesday’s close.

Write to Callum Keown at callum.keown@barrons.com