What Happened?

A number of stocks jumped in the morning session after solar stocks rebounded as the US Commerce Department revealed plans to impose tariffs of up to 3,521% on solar panels imported from Cambodia, Thailand, Malaysia, and Vietnam. What this does is shake up the whole low-cost supply chain that a lot of solar installers and developers have been relying on. Suddenly, importing those panels would be way more expensive, which makes domestically produced panels a lot more attractive. 

For US solar manufacturers, this represented a major competitive boost, as higher import costs could lead to increased market share and pricing power. 

For investors, the rally reflected expectations of stronger revenues and profitability for American solar companies as the industry adjusts to a more protectionist trade environment.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, following stocks were impacted:

• Renewable Energy company First Solar (NASDAQ:FSLR) jumped 14.9%. Is now the time to buy First Solar? Access our full analysis report here, it’s free.
• Renewable Energy company SolarEdge (NASDAQ:SEDG) jumped 13.9%. Is now the time to buy SolarEdge? Access our full analysis report here, it’s free.

Zooming In On First Solar (FSLR)

First Solar’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. But moves this big are rare even for First Solar and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 6 months ago when the stock dropped 16.1% on the news that renewable energy stocks declined as Republican party candidate Donald Trump was declared the winner of the 2024 US presidential election. For clean or renewable energy stocks, President-elect Trump is considered a headwind to their businesses. Specifically, his administration could lead to an overhaul of recent industry progress, including a repeal of President Biden’s Inflation Reduction Act. The IRA, as it's known, offers long-term tax credits for solar, wind, geothermal, and other renewable energy projects, often extending them for a decade. These tax credits offer stability and predictability, enabling companies to make long-term investment plans. For example, solar and wind energy developers benefit from a 30% investment tax credit (ITC), which can increase further if certain labor and domestic content standards are met.

First Solar is down 27.3% since the beginning of the year, and at $135.60 per share, it is trading 54.9% below its 52-week high of $300.71 from June 2024. Investors who bought $1,000 worth of First Solar’s shares 5 years ago would now be looking at an investment worth $3,371.

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