First Solar Gains 56% in a Month: How Should You Play the Stock?

First Solar Inc.’s FSLR shares have surged 55.9% in the past month, outperforming the Zacks solar industry’s gain of 37.3% as well as the broader Zacks Oil-Energy sector’s growth of 8.8% in the said timeframe. It also beat the S&P 500’s growth of 11.8%.

Other prominent solar stocks, such as Canadian Solar CSIQ and Emeren SOL, also delivered stellar performances on the bourses, as evident from their one-month price gain of 40.8% and 33.9%, respectively.

With FSLR stock on the rise, solar investors might rush to add it to their portfolio. However, to assert whether it would be prudent to add FSLR stock to your portfolio right now or wait a little longer, let’s delve deeper. This should help us understand the reason(s) behind the stock’s recent surge, its ability to retain the same and whether there is any risk associated with investing in it.

What Pushed Up FSLR Stock?

On May 13, 2025, the U.S. House of Representatives’ Ways and Means Committee introduced a tax and spending proposal that advocated for a gradual phase-out of tax incentives for low-carbon industries, such as solar. Although the bill was not exactly in favor of the clean energy industry, it was less aggressive than what the analysts expected and avoided immediate rollbacks, thereby prompting an immediate surge in the share price of companies like FSLR.

Following this news, Wolfe Research upgraded First Solar's stock rating to "Outperform", citing the company's strong domestic market position. This rating upgrade might have added an additional impetus to FSLR’s performance at the bourse.

Can FSLR Hold Onto Its Winning Streak?

Soaring solar energy demand worldwide has been encouraging solar product and project manufacturers like First Solar, Canadian Solar and Emeren to enhance their manufacturing capabilities. In line with this strategy, First Solar is currently in the process of expanding its manufacturing capacity by approximately 4 gigawatts (GW). Through its vigorous manufacturing capacity expansion plans, the company expects to have an annual manufacturing capacity of more than 25 GW by the end of 2026 and sell 15.5-19.3 GW of solar modules (by 2025-end).

Such a solid manufacturing enhancement strategy should attract more customers, thereby boosting its revenue stream. As of March 31, 2025, First Solar entered into contracts with customers for the future sale of 66.1 GW of solar modules for an aggregate transaction price of $19.8 billion, which it expects to recognize as revenues through 2030. This should also significantly bolster First Solar’s bottom-line performance 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 34.5%, which is better than its industry’s 26.3%.

Now let’s take a quick look at FSLR’s near-term earnings and sales estimates to check if these reflect similar improvement trends.

Estimates for FSLR Stock

The Zacks Consensus Estimate for second-quarter 2025 revenues and earnings suggests an improvement of 0.2% and a decline of 13.5%, respectively, from the prior-year level.

The annual estimate figures, however, indicate solid improvement trends. The Zacks Consensus Estimate for 2025 earnings indicates an improvement of 23.5% from the 2024 level, while that for revenues implies a surge of 15.1%. Its 2026 estimates also reflect similar growth trends. However, the downward revision in its near-term earnings estimate over the past 60 days suggests investors’ loss of confidence in this stock.

FSLR Stock Trading at a Premium

In terms of valuation, FSLR’s forward 12-month price-to-sales (P/S) is 4.06X, a premium to its industry’s average of 1.34X. This suggests that investors may be paying a higher price than the company's expected sales growth compared to that of its industry. The stock’s forward 12-month P/S also looks stretched when compared to its five-year median of 3.58X.

Other industry players like Canadian Solar and Emeren are trading at a discount to the industry. While CSIQ is trading at a forward 12-month P/S of 0.09X, SOL is doing so at 0.83X.

Risks to Investing in FSLR Stock

Despite the growth prospects offered by FSLR, it poses certain risks that one should consider before investing. Notably, significant production capacity enhancement in China relative to global demand created an oversupply, which, in turn, has visibly dragged down the price of modules and, to some extent, created supply-demand imbalances. Consequently, if FSLR’s competitors lower module prices to or below their manufacturing costs or operate at minimal margins, it could negatively impact First Solar's business.

Moreover, in April 2025, the U.S. President announced a 10% “baseline” reciprocal tariff on most trading partners, including Vietnam, India, and Malaysia, which serve as key manufacturing bases for First Solar. Although higher country-specific tariffs were paused for 90 days, the 10% tariff remains in effect. If the higher tariffs are eventually imposed, First Solar’s production costs could rise, particularly for modules made in these countries. This may limit its ability to sell certain modules in the United States and affect operations at some international facilities. As a result, these tariffs could negatively impact the company’s overall operational performance and financial results.

Final Thoughts

A prudent investor should wait for a more appropriate time to buy FSLR stock, considering its premium valuation, downward revision in near-term earnings estimates and the uncertainties revolving around the tariff situation.

However, those who already own this Zacks Rank #3 (Hold) stock may continue to do so, considering its upbeat sales estimates, stellar performance at the bourse over the past month 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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