We came across a bullish thesis on First Solar Inc. (FSLR) on Etcaetera’s Substack by Akim. In this article we will summarize the bulls’ thesis on FSLR. First Solar Inc. share was trading at $239.84 as of Sept 11th.
A typical home improvement project with workers installing a residential solar energy system.
First Solar Inc. (FSLR) is a U.S.-based solar technology company providing photovoltaic (PV) solar energy solutions, primarily in the United States. The company holds a critical position in the nation’s energy agenda, drawing significant attention and protection from the federal government against cheaper Chinese manufacturers. Currently, First Solar is trading at around $227, having declined approximately 20% from its recent highs of $300, which presents an attractive valuation opportunity. The stock trades at 20 times earnings, below its pre-COVID-19 levels of 25 to 30 times earnings, despite improved growth prospects. Many valuations were inflated during the pandemic and the period of favorable monetary policy, making First Solar relatively cheaper now compared to its historical metrics.
First Solar is benefiting from several generational tailwinds that are likely to drive its growth for years to come. Wind and solar power combined have surpassed coal in electricity generation during the first four months of 2024, highlighting the growing demand for renewable energy. In the second quarter, First Solar reported a doubling of quarterly profits, driven by a surge in demand from artificial intelligence and data centers, which have experienced exponential growth in energy consumption over recent years. The company already has a sufficient demand pipeline extending until 2030, underscoring its strong growth trajectory from top to bottom line and across its balance sheet. As a result, First Solar is a compelling addition to a diversified portfolio or an AI and energy mix, offering impressive growth potential.
Concerns about a potential Trump-Vance victory in the upcoming U.S. elections, which could favor fossil fuels, are seen as irrational. The solar sector, including First Solar, performed well during both the Trump and Biden administrations. The long-term growth of solar energy demand in the U.S. remains robust, particularly given the abundant sun exposure in the American Southwest. These political fears present a great entry point for investors before the stock potentially appreciates. The increasing share of renewables in the U.S., particularly solar energy, is likely to act as a tailwind for First Solar, regardless of political developments.
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Given these factors, First Solar appears to be a potential multibagger stock with steady growth prospects. With a strong foundation in a rapidly expanding sector, the company is likely to double its stock price over the next three to five years, offering a compelling risk/reward opportunity for investors.
First Solar Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 66 hedge fund portfolios held FSLR at the end of the second quarter which was 51 in the previous quarter. While we acknowledge the risk and potential of FSLR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FSLR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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