In This Article:
What Happened?
Shares of solar panel manufacturer First Solar (NASDAQ:FSLR) fell 9% in the afternoon session after a note from Citi analysts warning that the company's (FSLR's) eligibility for solar 45X tax credits (federal tax incentive for domestic manufacturers that produce qualifying advanced energy components) might expire in 2028, four years earlier than the 2032 timeline proposed in the original House bill draft. The earlier phaseout could significantly reduce long-term profit margins and dampen investor confidence, as these credits are a key component of First Solar's cost advantage and earnings.
The shares closed the day at $164.91, down 7.6% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy First Solar? Access our full analysis report here, it’s free.
What The Market Is Telling Us
First Solar’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its 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 11.8% since the beginning of the year, and at $164.47 per share, it is trading 45.3% 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 $3,805.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.