On Thursday, Mizuho Securities adjusted its stance on First Solar (NASDAQ:FSLR) stock, shifting its rating from Buy to Neutral, while simultaneously raising the price target to $274 from the prior $209.
This change reflects the firm's recognition of First Solar's increased pricing power, the growing impact of import tariffs, and the anticipated lack of domestic competition, which are expected to contribute to stable pricing through 2029.
The updated price target from Mizuho represents a $65 increase and is attributed to several factors.
These include a positive outlook on the company's ability to command higher prices due to domestic content requirements, the effects of rising import tariffs, and a forecasted scarcity of competitors within the United States over the next three years.
The firm estimates that these conditions could result in a $48 per share impact on First Solar's valuation.
Additionally, Mizuho cites an anticipated rise in relative multiples as a contributing factor to the new price target, adding $17 per share.
This increase is based on an expected one-turn elevation in EBITDA and P/E multiples for First Solar's peers within the industry.
Despite the raised price target, the downgrade to Neutral is driven by the current valuation of First Solar's stock, which Mizuho believes already accounts for the company's robust pricing power.
Furthermore, the firm indicates that the potential for further stock appreciation is limited, even under the most optimistic scenario.
Mizuho's bull case, which includes the possibility of a 5-cent per watt price adder in the U.S. market and the addition of one new U.S. production line, suggests a ceiling of $325 for First Solar's stock.
The adjustment by Mizuho Securities arrives as the solar industry navigates a landscape shaped by policy changes and market dynamics, with First Solar at the forefront due to its established presence and manufacturing capabilities in the United States.
InvestingPro Insights
With Mizuho Securities updating its rating and price target for First Solar (NASDAQ:FSLR), investors may be looking for additional data points to inform their decisions. According to real-time data from InvestingPro, First Solar holds a market capitalization of $29.78 billion USD and is trading at a price-to-earnings (P/E) ratio of 29.38. The data also shows robust revenue growth of 27.28% over the last twelve months as of Q1 2024, indicating the company's strong performance in the market.
Two pertinent InvestingPro Tips for First Solar highlight the company's financial health and future prospects. Firstly, First Solar maintains a stronger cash position than debt on its balance sheet, suggesting financial stability. Secondly, analysts anticipate sales growth in the current year, which aligns with the positive outlook presented by Mizuho Securities. Additionally, it's worth noting that First Solar's stock has recently experienced significant returns, with an impressive 80.77% three-month price total return as of the latest available data.
For investors seeking a deeper dive into First Solar's potential, InvestingPro offers additional analysis and tips. There are 15 more InvestingPro Tips available for First Solar, providing a comprehensive view of the company's financials, market performance, and analyst expectations. Access these insights and make the most of your investment strategy with a special offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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