First Solar Double Downgraded on Prospect of Biden Tariff Cut

Joe Biden may cut or eliminate tariffs that helped First Solar, said Raymond James analyst Pavel Molchanov, who double-downgraded the stock.
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First Solar  (FSLR) - Get Report shares dropped Tuesday after Raymond James analyst Pavel Molchanov double-downgraded the solar-power-systems company to underperform from overperform and removed his $90 share-price target.

He wrote in a report that President-elect Joe Biden is likely to cut or eliminate President Donald Trump’s tariffs, which have made imported modules more expensive and given an advantage to First Solar, according to The Fly.

The tariffs concern only crystalline silicon modules, so producers of thin film modules, such as First Solar, have benefited, MarketWatch reports.

"If section 201 is gone, the thin film exemption loses its value, and multiples might compress," Molchanov said. 

"In our view, the market is underestimating these risks -- which, to underscore, are specific to First Solar rather than the industry broadly -- hence the downgrade."

First Solar shares recently traded at $81, down 5.9%. They have climbed 44% so far this year.

On Oct. 28, Morningstar analyst Travis Miller raised his fair-value estimate for the stock to $63 from $61, after the company “reported third-quarter results in line with expectations and continued to expand its sales pipeline,” he said.

“The fair value increase was primarily due to a slight improvement in factory yield and time-value appreciation since our last update. We are reaffirming our no-moat and stable moat trend ratings."

Miller sees First Solar as a “high-quality option for investors who want to increase their U.S. renewable energy exposure. However, investors should be cautious of valuation with the stock trading at a 50% premium [Oct. 28] to our new fair value estimate.”