First Solar (NASDAQ:FSLR), the world’s largest thin-film solar module manufacturer, has recently experienced a 24% drop from its all-time high. Prior to this decrease, the investment was considered overvalued, but following the pullback, there is a bullish outlook for the stock over the next year. Wall Street’s high EPS and revenue estimates for the remainder of 2024 and 2025 suggest that the stock is likely to outperform the S&P 500 (SPX) in the coming year.
The current valuation of First Solar is seen as premium with high momentum. The stock’s P/S ratio has expanded significantly, reflecting the company’s recent faster growth rates. However, it is predicted that this high valuation may not be sustainable in the long term, especially if there is a change in government leadership that favors fossil fuels over clean energy.
Industry tailwinds, such as government policies and incentives, are currently driving growth for First Solar. The decreasing cost of solar photovoltaic systems and advancements in technology make solar energy more competitive with fossil fuels in terms of price per kWh.
The growth trajectory of the solar energy market is not linear and can be influenced by various factors such as tariffs and interest rates. Despite potential challenges, First Solar remains a buy on Wall Street with a consensus rating of Moderate Buy and an average price target implying a 22% upside potential.
In conclusion, after the recent pullback in stock price, First Solar has the potential to deliver significant returns over the next 12 months. However, caution is advised for the longer term as factors like government policies and market fluctuations could impact the stock’s performance. Overall, First Solar is worth owning for at least the next 12 months.