On Wednesday, Baird, a financial services firm, adjusted its outlook on First Solar (NASDAQ:FSLR), reducing the price target to $267 from the previous $307. The firm continues to endorse an Outperform rating for the solar energy company. The revision reflects concerns over potential legislative changes that could affect the renewable energy sector.
The price target adjustment was made to account for the possibility of a premature expiration of the 45X tax credits, which could signal an increased risk if there are repeals or modifications to the Inflation Reduction Act (IRA). Despite this adjustment, Baird's stance on First Solar remains optimistic. The firm highlighted that any increase in tariffs would likely be beneficial for First Solar, potentially strengthening the company's pricing power due to its domestically produced modules.
Baird's new price target of $267 is based on a sum-of-the-parts (SOTP) valuation approach. The valuation includes approximately $210 based on an estimated 12 times the earnings per share (EPS), assuming full production capacity, along with base case average selling prices (ASPs) and cost per watt. Additionally, around $57 of the valuation is attributed to tax credits, derived from a discounted cash flow (DCF) analysis.
The firm's analysis compares First Solar to its peers, which are trading at a median of approximately 10 times their projected 2025 earnings estimates. Baird's valuation reflects a belief in First Solar's ability to navigate the changing legislative landscape and maintain a strong position in the solar energy market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.