First Solar Misses on Q1 Earnings: Should You Hold or Sell the Stock?

First Solar Inc. FSLR ended first-quarter 2025 on a dismal note, with both its earnings and sales falling short of their respective Zacks Consensus Estimate. Its earnings also performed poorly on a year-over-year basis. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) 

The company has lowered its sales guidance for 2025, taking into account the expected impact of the new reciprocal tariffs implemented in April 2025 by the U.S. government, particularly on India, Malaysia and Vietnam, where it has manufacturing facilities. FSLR has also reduced its operating income and bottom-line expectations for the current year. 

Such a disappointing quarterly performance and weak 2025 outlook might discourage investors interested in solar stocks from investing in FSLR. However, before making any hasty decision, it would be prudent to take a look at how FSLR has performed at the bourses over the past year, the stock’s prospects as well as risks (if any) to investing in the same. This should help investors make a more insightful decision.

FSLR Stock Beats Industry, Lags Sector & S&P500

First Solar’s shares have lost 22.7% over the past year, outperforming the Zacks solar industry’s decline of 40.3%. However, it underperformed the broader Zacks Oil-Energy sector’s fall of 9.2% as well as the S&P 500’s return of 10.3% in the same period.

Other heavy-weight industry players like Canadian Solar CSIQ and Enphase Energy ENPH have lost considerably over the past year. While CSIQ’s shares lost 41%, ENPH’s shares plunged 54.7%. 

What Caused FSLR to Lose?

Even if demand for solar modules continues to grow, the rapid expansion of manufacturing capacity undertaken by many module manufacturers in China and certain parts of Southeast Asia, particularly those producing crystalline silicon wafers, cells, and modules, has created and may continue to cause periods of structural imbalance between supply and demand. This, in turn, can have a material impact on FSLR’s operating results, which might have caused its investors to lose interest in the stock lately, as reflected in its share price loss over the year-to-date period (as mentioned above). 

Also, First Solar recently identified manufacturing issues affecting certain of its Series 7 modules manufactured in 2023 and 2024 that may cause the modules to experience premature power loss once installed in the field. This might have also hurt market sentiment for this stock, as evident from its share price decline. 

Will FSLR Stock Recover Anytime Soon?

Soaring solar energy demand has been encouraging solar product manufacturers like Canadians Solar, Enphase Energy and First Solar to enhance their manufacturing capabilities. With this aim in view, First Solar recently commenced operations at its fourth manufacturing facility in the United States and completed the expansion of the manufacturing footprint at its existing facilities in Ohio and India.

Looking ahead, the company is currently in the process of expanding FSLR’s manufacturing capacity by approximately 4 GW, including the construction of its fifth U.S. manufacturing facility, which is expected to commence operations in the second half of 2025. It is also expanding its manufacturing capacity at the existing facilities. Altogether, these efforts are expected to significantly bolster First Solar’s operational results in the long run. 

In line with this, the Zacks Consensus Estimate for FSLR’s long-term (three to five years) earnings growth rate is pegged at 37.4%, which is better than the industry’s long-term return of 27.4%. 

A quick sneak peek at FSLR’s near-term earnings and sales estimates mirrors similar improvement trends.

Estimates for FSLR Stock

The Zacks Consensus Estimate for second-quarter 2025 revenues and earnings suggests a solid improvement of 22.4% and 28.9%, respectively, from the prior-year level.

The annual estimate figures also indicate a similar picture. However, the downward revision in its earnings estimate suggests investors’ recent loss of confidence in this stock’s earnings growth capabilities.

FSLR Stock Trading at a Premium

In terms of valuation, FSLR’s forward 12-month price-to-sales (P/S) is 2.52X, a premium to its peer group’s average of 0.71X. This suggests that investors may be paying a higher price than the company's expected sales growth compared to that of its peers.

Another industry player, Enphase Energy, is also trading at a premium to its peer group, with its forward 12-month P/S being 4.23X. Canadian Solar, however, is trading at a discount, with its forward 12-month P/S being 0.08X. 

Risks to Investing in FSLR Stock

Despite the growth prospects offered by FSLR, there are certain risks that one should consider before investing. Notably, in early February 2025, China announced that it would tighten export controls for five key minerals, including products containing tellurium — one of the main components of FSLR’s CdTe module production process. Although tellurium and products containing tellurium are sourced globally, China is a major global producer of tellurium and products containing tellurium. So, if this export control is implemented by China, it may affect First Solar’s module production process. 

Final Thoughts

A prudent investor should wait for a more appropriate time to buy FSLR stock, considering its dismal price performance over the past year, downward revision in near-term earnings estimates and premium valuation. 

However, those who already own this Zacks Rank #3 (Hold) stock may continue to do so, considering its upbeat sales estimates and long-term growth prospects. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

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