First Solar (FSLR): Assessing Valuation as Investor Focus Intensifies on Growth Momentum and U.S. Expansion

First Solar is seeing a wave of investor interest as earnings and revenue expectations pick up. This interest is driven by the company’s recent outperformance and raised sales guidance. Investors are also watching its expanded U.S. manufacturing and exposure to surging electricity demand.

See our latest analysis for First Solar.

First Solar’s strong recent run has caught the market’s attention, with shares surging over 12% in the past month and easily outpacing both its sector and the broader market. This momentum comes after key news, including upgraded sales guidance, expanding U.S. manufacturing, and high-profile analyst upgrades, fueling bullish sentiment. While its one-year total shareholder return is slightly negative, the five-year total return still handsomely rewards patient holders. This suggests that optimism around future growth potential is building rather than fading.

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But after such a strong upward move, is First Solar’s stock truly undervalued and offering upside, or has the market already baked in the company’s rosy outlook and future gains? Could there still be a genuine buying opportunity here?

Most Popular Narrative: 3.6% Overvalued

First Solar’s last close of $232.13 sits above the most widely followed narrative’s fair value of $224.13, suggesting the current market price is a notch higher than consensus projections. With this gap in mind, let's delve into a key driver that shapes the narrative’s view.

Recent U.S. policy changes, specifically, strengthened incentives and tighter restrictions against foreign entities of concern (such as China) under the new reconciliation legislation, are boosting First Solar's competitive moat. These policies are supporting robust demand for domestically produced modules and enabling the company to capture higher long-term contracted pricing, directly improving forward revenue visibility and gross margins.

Read the complete narrative.

Curious what kind of future growth justifies these bullish projections? The market’s favorite storyline hinges on blockbuster earnings, sizable revenue moves and outsized profit margins. If you want to uncover which assumptions are fueling the target price, you’ll need to see the full narrative for yourself.

Result: Fair Value of $224.13 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing trade policy uncertainty and potential reductions in U.S. policy support could quickly shift the outlook for First Solar’s margins and future growth.

Find out about the key risks to this First Solar narrative.

Another View: Is the Market Missing Something?

Looking through another lens, First Solar's price-to-earnings ratio stands at 19.8 times. This is not only substantially lower than its US Semiconductor industry peers, who average 37.7x, but also below the company’s fair ratio of 37.7x. That gap highlights a valuation opportunity, but are investors right to price in more risk?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own First Solar Narrative

If you want to dive deeper and trust your own perspective, you can dig into the numbers and build a narrative of your own in just minutes with Do it your way.

A great starting point for your First Solar research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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