As clean energy investments continue to escalate worldwide, solar power has emerged as the fastest-growing energy source, brightening the growth prospects for key industry players like First Solar FSLR and Canadian Solar CSIQ. As investor interest in green energy escalates, these two solar giants offer compelling yet contrasting opportunities worth exploring.
While First Solar, a U.S.-based company, specializes in manufacturing advanced thin-film photovoltaic (PV) solar modules and focuses on deploying utility-scale solar projects, Canadian Solar, headquartered in Ontario (Canada), produces crystalline silicon solar panels and is deeply involved in both utility-scale solar power and battery-energy storage projects development. As global solar power generation has doubled in the past three years, investors are naturally attracted to solar stocks. However, they may find it challenging to choose between these two promising solar players. Let’s do a comparative analysis to help make an informed decision.
Key Takeaways for FSLR
Recent Achievements: First Solar ended 2024 with a record annual sales growth of 26.7%, backed by increased module shipments. During 2024, it started production of Series 7 modules at its first manufacturing facility in Alabama, with the company’s total installed nameplate production capacity across all its facilities being approximately 21 gigawatts (GW). To further enhance its manufacturing capability, First Solar is currently in the process of expanding its manufacturing capacity by approximately 4 GW.
Looking ahead, through its vigorous manufacturing capacity expansion, the company expects to have an annual manufacturing capacity of more than 25 GW by the end of 2026. Such a solid manufacturing enhancement strategy should attract more customers, thereby boosting its revenue stream. As of Dec. 31, 2024, First Solar entered into contracts with customers for the future sale of 68.5 GW of solar modules for an aggregate transaction price of $20.5 billion, which it expects to recognize as revenues through 2030.
Financial Stability: First Solar’s cash and cash equivalents as of Dec. 31, 2024, totaled $1.79 billion. Its long-term debt as of Dec. 31, 2024, amounted to $0.37 billion, and the current debt level was $0.24 billion. Therefore, the stock’s cash reserve was much higher than the long-term and current debt levels. So, we may safely conclude that First Solar boasts a strong solvency position, which, in turn, should enable FSLR to meet its investment target of $1.3-$1.5 billion in building new manufacturing facilities, expanding the existing ones, as well as upgrading machinery and equipment. Such a robust capital expenditure plan can be expected to allow the company to duly meet its production target of 18-19 GW and sell 18-20 GW of solar modules (by 2025-end).
Challenges to Note: First Solar believes that solar module manufacturers, especially in China, have built significant production capacity, with an estimated 270 GW added in 2024 alone. This rapid expansion could create a structural imbalance between supply and demand, potentially triggering pricing volatility. If FSLR’s competitors lower module prices to levels near or below production costs, or operate with minimal or negative margins for extended periods, it could face pressure on pricing and profitability.
Moreover, First Solar identified manufacturing issues affecting certain of its Series 7 modules manufactured in 2023 and 2024 that might cause the modules to experience premature power loss once installed in the field. Based on currently available information, FSLR believes that a reasonable estimate of the aggregate losses related to these manufacturing issues should be in the range of $56-$100 million, which, if incurred, would hurt its near-term operating results.
Key Takeaways for CSIQ
Recent Achievements: As of Dec. 31, 2024, Canadian Solar brought a record 1.3 GWp of solar projects to commercial operation. Looking ahead, the company boasts a strong pipeline of projects, sales of which fetch solid revenues. As of Dec. 31, 2024, Canadian Solar’s total solar project pipeline was 24.9 gigawatt-peak (GWp).
CSIQ has also been effectively enhancing its manufacturing capacity to meet the growing solar demand. Evidently, the company is currently on track to fully ramp up production at its module factory in Mesquite, TX. This facility is expected to contribute approximately 3 gigawatts (GW) of volume delivery this year, thereby increasing the share of domestically produced products in the company’s total U.S. shipments.
Financial Stability: Canadian Solar’s cash and cash equivalents (along with restricted cash) totaled $2.25 billion as of Dec. 31, 2024, down sequentially. Meanwhile, its current debt of $2.76 billion, as well as a long-term debt of $2.49 billion, came in higher than the cash balance. Hence, we may conclude that the stock holds a weak solvency position, which might limit its ability to meet its investment target for expanding its manufacturing facilities.
Challenges to Note: Declining average selling price (ASP) of solar modules worldwide, primarily due to increased manufacturing capacity in China, continues to plague the global solar industry, particularly non-Chinese module manufacturers like Canadian Solar. Evidently, despite recording year-over-year growth in its module shipment, Canadian Solar registered an 11% year-over-year decline in revenues during the fourth quarter of 2024, with the primary reason being a decline in its module ASPs. With Chinese manufacturers continuing to dominate the global market with their oversupply of solar products and driving down prices globally, there remains little hope for the low-price environment for modules to improve drastically, at least in the near term. This, in turn, may continue to adversely impact Canadian Solar’s top-line performance in 2025.
How Do Zacks Estimates Compare for FSLR & CSIQ?
The Zacks Consensus Estimate for First Solar’s 2025 sales and earnings per share (EPS) implies an improvement of 31.1% and 55.6%, respectively, from the year-ago quarter’s reported figures. The stock’s EPS estimates, however, have been trending southward over the past 60 days.
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The Zacks Consensus Estimate for Canadian Solar’s 2025 sales implies a year-over-year improvement of 24.7%. The consensus mark for its loss per share is pinned at 6 cents, suggesting an improvement from the year-ago reported loss of $1.45. The stock’s bottom-line estimates for 2025, however, have been trending southward over the past 60 days.
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Stock Price Performance: FSLR vs CSIQ
FSLR (down 19.5%) has outperformed CSIQ (down 28%) over the past three months, and it has done the same in the past year as well. While FSLR’s shares have lost 23.7%, CSIQ plunged 47.2%.
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Image Source: Zacks Investment Research
Valuation of First Solar More Attractive Than That of Canadian Solar
First Solar is trading at a forward earnings multiple of 6.49X, below its median of 10.51X over the past year and Canadian Solar’s forward earnings multiple of 26.64X. CSIQ’s forward earnings multiple has remained much above its median of 9.94X over the past year.
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Final Call
While both First Solar and Canadian Solar are promising players in the solar space, solar investors should stay invested in FSLR. This is because FSLR presents more financial stability than CSIQ and offers robust revenue generation (which Canadian Solar lacks at the moment).
From a valuation perspective, as mentioned above, FSLR seems to be a much more viable choice for investors than CSIQ. Since CSIQ is trading at a higher forward earnings multiple, investors will be paying a higher price for each dollar of its earnings.
While FSLR carries a Zacks Rank #3 (Hold), Canadian Solar holds a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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