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First Solar, Inc.


Wall street consensus:

### Consensus Report: First Solar Inc. (FSLR)

#### Overview of Performance

The analyses from Goldman Sachs & Co. LLC, Andrew S. Percoco, and another report by Goldman Sachs converge on a bullish outlook for First Solar Inc. (FSLR), with each expressing confidence in the firm's market positioning, demand visibility, and strategic advantages. The company's solid backlog, competitive pricing, and efficiency in operations support a consistent view that FSLR stands well-poised for significant growth. Despite a slight revenue miss in the fourth quarter of 2023, strong margins, a favorable pricing environment, and positive guidance for 2024 underpin the optimistic assessments. Price targets across reports suggest an undervaluation of FSLR's stocks, with suggested 12-month targets indicating substantial upside potential.

#### Synthesis of Key Topics

- **Demand Visibility and Market Position:** FSLR benefits from robust demand visibility, with a substantial backlog extending through 2030. This visibility provides a strong foundation for revenue and earnings stability, supported by strategic backlog management and domestic manufacturing advantages.

- **Competition and Pricing:** FSLR's competitive edge is attributed to its technological advancements, supply chain resilience, and ability to maintain strong average selling prices (ASPs). The company’s positioning against Asian competitors and its insular strategy from geopolitical and supply chain risks reinforce its market dominance and pricing stability.

- **Policy Influence and Strategic Growth:** Policy developments, particularly relating to tariffs and domestic content requirements, are highlighted as potential tailwinds. FSLR's engagement in policymaking and its strategic focus on R&D, capacity expansion, and the CuRe program are key to sustaining long-term growth and competitive advantage.

#### Comprehensive Future Investment Considerations

1. **Stable Future Earnings and Pricing Power:** The vast contracted backlog, coupled with FSLR's ability to navigate through industry-wide pressures, bolsters confidence in stable future earnings and ASPs. Investors should closely monitor FSLR's execution on maintaining pricing strength.

2. **Valuation Opportunity:** The consensus among the reports points toward a significant undervaluation of FSLR's stock, emphasizing the potential for a re-rating as the market corrects this disconnect.

3. **Policy and Regulatory Landscape:** Upcoming policy decisions, especially concerning solar tariffs and domestic manufacturing incentives, may significantly impact FSLR’s operational framework and competitive standing.

4. **Technological Advancements and Operational Efficiency:** Continued investment in technology (notably the CuRe program) and efforts to enhance operational efficiencies are critical. These factors, along with utilization of IRA tax credits, are deemed essential for sustaining margins and fostering long-term growth.

5. **Supply-Demand Dynamics and Bookings Outlook:** Observing the solar industry's supply-demand balance and FSLR's ability to recover and manage bookings effectively will be central in evaluating the company's ability to capitalize on market opportunities and navigate challenges.

In essence, First Solar Inc. is characterized by a compelling growth narrative that encompasses demand visibility, strategic market positioning, and a proactive approach to policy and technological advancements. The consensus indicates a strong buy recommendation, with future investment considerations underscoring areas of potential risks and opportunities.


​Recent Conference Call

### Summary of First Solar, Inc. FQ4 2023 Earnings Call

**Insightful Quote from CFO, Alexander R. Bradley:**
"Our strategic expansion of manufacturing capacity in the U.S., which is supported by an extensive domestic value chain, enables our customers' efforts to benefit from the ITC and production tax credit domestic content bonuses under the Inflation Reduction Act. The resulting demand for First Solar's American-made solar technologies, combined with the eligibility of our vertically integrated manufacturing facilities for Section 45X tax credits, is expected to contribute significantly to our financial performance in the coming years."

**Key Quarterly Business Trends:**

1. **Strategic Manufacturing Capacity Expansion:** First Solar is expanding its U.S. manufacturing capacity, a move strongly aligned with benefiting from incentives such as the Inflation Reduction Act's production tax credit. This expansion underscores the company's strategy to leverage policy environments to bolster its growth and competitiveness, particularly in the U.S. market.

2. **Solid Demand and Strong Contracted Backlog:** The company reported continued momentum with 2.3 gigawatts of net bookings since the previous earnings call, achieving a contracted backlog of 80.1 gigawatts. This demonstrates strong mid- to long-term demand for First Solar's technology, despite global oversupply and pricing volatility concerns, illustrating its unique value proposition and strategic market position.

3. **Investment in R&D and Technology Advancements:** First Solar is significantly investing in research and development, including dedicated R&D facilities expected to be operational in 2024. These advancements, such as launching the first bifacial, thin-film solar panel, reflect the company's commitment to innovation and technological leadership within the solar energy sector.

**Critical Analyst Questions and Management Responses:**

1. **Moses Nathaniel Sutton (BNP Paribas Exane):** Inquired about the potential for bookings to near zero due to the significant contracted backlog or whether ASP might decrease.
- **Management Response:** CEO highlighted ongoing commercial conversations for north of 3 gigawatts, emphasizing patience in negotiations and maintaining strong ASPs. They anticipate maintaining a 1:1 book-to-bill ratio and are focused on filling their 2027 opportunity pipeline, demonstrating confidence in their market strategy and the value of their offerings.

2. **Philip Shen (ROTH MKM Partners):** Asked about the influence of policy developments on pricing strategy and the potential impact of secondary market transactions due to project delays.
- **Management Response:** CFO Bradley mentioned that pricing strategy reflects market conditions and customer value recognition. CEO Widmar elaborated on working solutions for project delays, ensuring contractual rights are upheld, and highlighted how policy dynamics and unique value propositions underpin pricing negotiations.

3. **Unique Question:** Concerning potential ASP trends in the face of evolving market and policy conditions.
- **Management Response:** The CFO noted the strategy of disciplined contract engagements and leveraging the company's strong market position to manage price dynamics

Key Questions to follow

Based on the analysis of the provided documents regarding First Solar Inc. (FSLR) within the thematic investment context of inflation, metals, renewables, green, and capital expenditure (Capex), here are three insightful questions that focus on the company's potential for future growth:

1. **How is First Solar Inc. positioned to leverage inflationary pressures and the volatility in metal prices to its competitive advantage, especially in light of its strong pricing power and the industry's push towards green energy solutions?** Given the insights from the documents highlighting FSLR's robust pricing trends and stable contracted backlog through 2030, it would be critical to understand how the company plans to navigate the challenges and opportunities presented by inflation and fluctuating metal prices. This includes understanding the potential impact on cost structures, supply chain strategies, and pricing models in the context of renewable energy production, where metals are a key component.

2. **In the face of aggressive global Capex into renewable energies and the green sector, how does First Solar Inc. plan to sustain and potentially grow its market share in the US and internationally?** The provided documents indicate strong demand visibility and strategic backlog management by FSLR, along with technological advancements and efficiency gains as part of its investment considerations. Analyzing FSLR's Capex strategy and its alignment with evolving market dynamics, competitive landscape, and policy frameworks would shed light on the company's growth prospects and resilience amidst fast-paced sector expansion.

3. **Given First Solar Inc.’s strategic focus on policy engagement and technological innovation, what are the potential growth implications of upcoming policy decisions (e.g., tariffs, domestic content requirements) and technological breakthroughs (e.g., the CuRe program)?** The documents underscore FSLR's active involvement in shaping favorable policy outcomes and its commitment to R&D for higher efficiency and lower degradation rates. Questioning how these policy frameworks and R&D efforts align with the thematic investment tag, including renewables and green initiatives, could provide deeper insights into FSLR's capability to secure a leadership position and achieve long-term sustainable growth in the evolving energy landscape.

These questions aim to critically evaluate First Solar Inc.’s strategic positioning and operational efficiencies in the context of broader thematic investment trends, offering a comprehensive understanding of the company's future growth avenues amidst dynamic industry changes.

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