FSLR - First Solar: An Attractive Risk-Premium Ratio
2024-03-07 07:28:00 ET
Summary
- The demand for solar technology is still rising. Despite potential oversupply, First Solar demonstrates steady customer acquisition rate and average selling price increase.
- 2023 results were slightly worse than our expectations due to delivery shifts. Anyway, FY2024 management outlook is positive and meets our forecast.
- We expect EBITDA to increase by 76% y/y in FY2024 and by 42% y/y in 2025.
- Government grants payout are about to begin. In Q1 2024, First Solar entered an agreement to sell a part of their receivables to a third party with a small discount, and we expect that official payments will begin in 2H 2024, supporting the company’s free cash flow generation.
- The key risk faced by First Solar is the repeal of the Inflation Reduction Act. If the Republicans win the election and gut IRA spendings, the company’s profitability and target price would decrease by about 50%.