Shares of First Solar (NASDAQ: FSLR) experienced a sharp 9.29% decline on October 10. This setback comes after Jefferies and Bank of America (NYSE: BAC) equity analysts revised their price targets downward.
Although both firms remain bullish overall in the long term, having reiterated their ‘Buy’ ratings, they expect significant short-term headwinds and setbacks — primarily due to labor shortages, regulatory pressures, and supply chain disruptions.
Earlier this year, 13-F filings revealed a significant investment in the company by Michael Burry, leading to a 40% rally over the course of just two weeks — although he has since sold his holdings. At press time, FSLR shares are trading at $205.04 — the solar manufacturer’s stock is up 20.38% year-to-date (YTD).
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Analysts revise FSLR and industry price targets
On the day the move to the downside occurred, Jefferies analyst Dushyant Ailani lowered his price target from $271 to $266. The researcher remains bullish on FSLR in the long term, citing strong demand for renewable power, but expects that the delays first revealed in the company’s Q1 report by Chief Financial Officer (CFO) Alexander Bradley will lead to disappointing performance in the upcoming Q3 2024 earnings call on October 29.
“As noted on our previous call, we have seen some requests from customers to shift delivery volume timing out as a function of project development delays”.
Ailani’s analysis echoes the sentiment of BAC researchers, who reduced the firm’s price target for First Solar from $343 to $321 on October 8.
BAC also sees delays causing projects that were slated to be operational by the end of 2024 pushed back to 2025, while also noting the solar company’s troubles with sourcing essential components like transformers and high-voltage circuit breakers, along with significant interconnection hold-ups.
These were by no means isolated occurrences — Roth MKM’s Philip Shen cited many of the same issues on October 9, when he downgraded Enphase Energy’s (NASDAQ: ENPH) price target from $140 to $130, while also adding that ENPH could be losing market share to Tesla’s (NASDAQ: TSLA) Powerwall 3, despite failure rates and challenges in customer service.
Put together, three price target revisions in the span of just a couple of days seem to have sent more risk-averse investors looking for more stability or perhaps short-term profits.
Long term optimism for FSLR amid mixed industry metrics
A 10% drop within the span of a day is notable — nonetheless, even more notable is the long-term optimism all three firms seem to hold regarding the future prospects of both First Solar and the wider industry.
For more concrete and actionable data, investors should turn to the Solar Energy Industries Association (SEIA) Q3 2024 market insight report. It seems to support the theses put forward by Jefferies, Bank of America, and Roth MKM.
While Q2 2024 was a record second quarter, with of 9.4GW of capacity installed, this 29% year-over-year (YoY) increase was simultaneously a 21% decline compared to Q1 2024.
Solar accounted for 67% of all new capacity added to the U.S. grid, — domestic module manufacturing capacity increased by over 10 GW. In contrast, residential installations saw a 37% decrease compared to last year.
Commercial segment installations increased by 6% YoY, but marked a 5% decrease from the previous quarter — while the community solar segment saw a 12% decline both YoY and QoQ.
The association expects that installations will decline by 4% overall for 2024, primarily due to potential antidumping tariffs that are being discussed, which would have a negative impact on residential and commercial segments.
That being said, the tariffs are unlikely to affect the leading utility segment, which saw installations grow by 59% YoY in Q2. On the whole, SEIA expects a steady rate of growth at 4% annually for the industry from 2025 to 2029.
