First Solar Faces Regulatory Challenges and Seeks Path to Recovery Amidst Market Turmoil

First Solar’s Crossroads: Policy Headwinds and the Path to Recovery
Victor Hale
Wednesday, Jun 18, 2025 8:56 PM ET

The solar energy sector is at a crucial juncture, and First Solar (FSLR) is navigating a challenging landscape marked by regulatory changes and trade tensions. Recent U.S. energy policies, particularly revisions to tax credits and increasing tariffs on solar imports, have significantly impacted FSLR’s stock performance. Analysts have adjusted their price targets downward, and the company has also lowered its guidance. However, beneath this short-term volatility lies a company with a strong backlog, strategic investments in domestic manufacturing, and a technological advantage that may facilitate its recovery. Here’s why investors should exercise caution now while remaining vigilant for potential catalysts.

### Policy Headwinds: Tax Credits and Tariffs Collide
The growth of the U.S. solar industry is being reshaped by federal actions. The proposed House budget reconciliation bill, which aims to eliminate residential solar tax credits by 2026 and impose stricter requirements on utility-scale projects, has created uncertainty in the residential market. While First Solar specializes in utility-scale projects, the overall slowdown in the sector is affecting demand and investor sentiment. Additionally, trade policies are exacerbating costs. Anti-dumping and countervailing duties (AD/CVD) on solar imports from Malaysia, Thailand, and Vietnam—countries that provided 3.8 GW of solar modules monthly in 2024—have led to a dramatic drop in imports to 1.1 GW in Q1 2025. Alternative suppliers like Indonesia and Laos are not only more expensive but also less reliable. These tariffs, combined with a universal 10% import tax, have compelled First Solar to revise its outlook for 2025. Revenue guidance has been adjusted to $4.5–5.5 billion (down from $5.3–5.8 billion), and module shipments are now projected to be between 15.5 and 19.3 GW, a decrease from the previous estimate of 18–20 GW.

### Stock Performance and Analyst Downgrades
FSLR’s stock has fallen 18% since the Senate proposed the tax bill in June 2025, reaching a 52-week low. This decline reflects the sharp uncertainty regarding policies. Analysts have responded accordingly:
– Morningstar has reduced its fair value estimate by 20% to $168, cautioning that restrictions on domestic manufacturing credits could further lower it to $128.
– RBC Capital lowered its price target from $230 to $188, citing pressure on margins and delays in project approvals.
– Zacks has issued a “Sell” rating, highlighting a 5.3% downward revision to Q2 earnings.

Currently, the stock is trading at a P/E ratio of 14.25x, considerably lower than peers like Enphase (ENPH) at 45.8x, indicating potential undervaluation. However, short-term risks—such as tariff disputes, project delays, and earnings volatility—are keeping investors on edge.

### First Solar’s Defense: Backlog and Domestic Manufacturing
Despite these challenges, First Solar’s 66.1 GW backlog, valued at $19.8 billion, offers some stability. These projects are contracted through 2030, providing revenue visibility. The company is also making significant investments in U.S. production:
– **Expansion Plans**: New factories in Alabama and Louisiana aim to increase domestic capacity to 10 GW annually by 2025, leveraging the Inflation Reduction Act’s 45X tax credit.
– **Technology Edge**: First Solar’s cadmium telluride (CdTe) panels, which avoid tariffs on crystalline silicon modules, provide efficiency benefits in hot climates. Cost reductions from these advancements may help mitigate the effects of tariffs. For instance, higher-efficiency Tunnel Oxide Passivated Contact (TOPCon) modules are reducing balance-of-system costs.

### Technical Analysis: A Bearish Near-Term Picture
From a technical standpoint, FSLR’s chart presents a cautionary outlook. The stock fell below its 200-day moving average in June 2025, signaling bearish momentum. Resistance levels between $180 and $200 (pre-2025 highs) seem out of reach without clearer policy direction, while a declining trendline indicates short-term support around $140.

### Investment Thesis: Wait for the Fog to Clear
**Near-Term Risks**:
– **Policy Uncertainty**: Changes to tax bills in the Senate could further worsen the outlook.
– **Tariff Delays**: Ongoing trade disputes in Southeast Asia and retaliatory tariffs could exert additional margin pressure.
– **Earnings Misses**: Q1’s revenue of $0.8 billion (down from $1.5 billion in Q4 2024) suggests execution challenges.

**Long-Term Catalysts**:
1. **Policy Clarity**: A resolution regarding tax credits beyond 2026 or relaxed tariff regulations could restore investor confidence.
2. **Domestic Capacity**: The establishment of over 10 GW of U.S. factories could position FSLR as a leader compliant with “Buy America” standards.
3. **Cost Efficiency**: Innovations in CdTe technology and TOPCon modules could lower project costs by 10–15%, enhancing profit margins.

### The Bottom Line
First Solar is caught in a challenging regulatory environment and facing rising costs, yet its backlog and strategic bets on domestic manufacturing provide a potential lifeline. Investors should refrain from aggressively pursuing the stock at this moment but keep an eye out for two key triggers:
– A bipartisan agreement to extend solar tax credits beyond 2026.
– Progress in addressing AD/CVD disputes, which might alleviate supply chain strains.

For now, the prudent strategy is to remain cautious. FSLR’s valuation indicates long-term potential, but immediate risks necessitate careful consideration. As the saying goes: Buy the rumor, sell the news—but only when the news is clear.

**Final Verdict: Hold for now.** Consider entering at $120–$130 (15% below current levels) if policy clarity emerges, but be wary of further downgrades until 2026.