First Solar Inc.’s FSLR shares have plunged 21.2% in the past three months, underperforming the Zacks solar industry’s decline of 6.3% as well as the S&P 500’s return of 5.2%. However, it has outpaced the broader Zacks Oil-Energy sector’s loss of 31.7% in the same time frame. 

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Other heavyweight solar stocks like Canadian Solar CSIQ, Enphase Energy ENPH and SolarEdge Technologies SEDG also performed poorly at the bourses, as evident from their share price loss of 16.1%, 48.3% and 62.7%, respectively, in the past three months. 

With solar photovoltaic (PV) expected to become the foremost renewable electricity source by 2030, as per a report published by the International Energy Agency in October 2024, clean energy investors, particularly those interested in solar, might see this as an opportunity to buy FSLR, considering its relatively lower share price and long-term growth potential. 

However, to assert if it would be prudent to add FSLR stock to your portfolio right now or wait a little longer, let’s delve deeper. This should help us understand what led to the stock’s decline and if there’s any risk to investing in the same.

What Caused FSLR Stock’s Recent Downfall?

First Solar has been grappling with some challenges in recent times, like the manufacturing issues affecting certain of its Series 7 modules manufactured in 2023 and 2024. This may cause the modules to experience premature power loss once installed in the field. Based on the currently available information and certain assumptions and estimates, First Solar expects aggregate losses related to these manufacturing issues to range between $50 million and $100 million. This might adversely impact its operational results in the near future.

Moreover, the company has recently lowered its sales guidance for 2024, taking into account the termination of the Plug Power contract as well as unfavorable average selling prices of its modules in some markets, particularly India. First Solar has also narrowed its earnings guidance for the year. 

These might have been the primary factors that caused investors to lose interest in this stock lately, which was duly reflected in its share price loss over the past three months, as mentioned above. 

Will FSLR Stock Recover Anytime Soon?

Soaring solar energy demand has been encouraging module producers like First Solar to enhance their manufacturing capabilities. The company manufactured a record 3.8 gigawatts (GW) in the third quarter of 2024 and sold 3 GW solar modules. Such solid module shipments resulted in FSLR registering a 10.8% year-over-year improvement in its third-quarter sales. 

As the largest solar PV manufacturer in the Western Hemisphere, First Solar continues to expand and invest in its manufacturing capacity to register similar sales growth in the coming quarters as well.  Notably, the company is currently in the process of expanding its manufacturing capacity by approximately 5.8 GW, which should enable FSLR to duly meet its production target of 15.6-15.9 GW and sell 14.2-14.6 GW solar modules (by 2024-end). This can be expected to bolster First Solar’s operational results significantly. 

The consensus estimate for FSLR’s long-term (three to five years) earnings growth rate is pegged at 43.4%. 

A quick sneak peek at FSLR’s near-term earnings and sales estimates mirrors similar improvement trends.

Estimates for FSLR Stock Send Mixed Impulse

The Zacks Consensus Estimate for fourth-quarter revenues and earnings reflects a solid improvement of 27.7% and 47.1%, respectively, from the prior-year level.

The annual estimate figures also indicate a similar picture. The Zacks Consensus Estimate for 2024 earnings indicates an improvement of 70.5% from the 2023 level, while that for revenues implies a surge of 25.5%. Its 2025 estimates also reflect similar growth trends. However, the downward revision in its earnings estimate reflects investors’ loss of confidence in this stock lately.

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Image Source: Zacks Investment Research

FSLR Stock Trading at a Premium

In terms of valuation, FSLR’s forward 12-month price-to-sales (P/S) is 3.59X, a premium to its peer group’s average of 0.96X. This suggests that investors may be paying a higher price than the company's expected sales growth compared to that of its peers. The stock’s P/S also looks stretched when compared to its five-year median value.

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Risks Posing Threat to Investing in FSLR Stock

Despite the growth prospects offered by FSLR, it poses certain risks that one should consider before investing. Notably, significant production capacity enhancement in China relative to global demand created an oversupply, which, in turn, has visibly dragged down the price of modules and, to some extent, created supply-demand imbalances. Consequently, if FSLR’s competitors lower module prices to or below their manufacturing costs or operate at minimal margins, it could negatively impact First Solar's business. 

Moreover, in October 2023, a U.S. coalition filed petitions with the U.S. Department of Commerce (“USDOC”) on aluminum extrusions, which resulted in further investigations. First Solar imports certain items that appear to be within the scope of investigations. If the USDOC imposes duties, First Solar’s operating results could be adversely impacted.

Final Thoughts

A prudent investor should wait for a more appropriate time to buy FSLR stock, considering its dismal price performance in the past three months and premium valuation. The stock currently has a VGM Score of D, which is also not a very favorable indicator of strong performance. 

The company currently has a Zacks Rank #4 (Sell), which further supports our thesis. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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