First Solar drops 13% on risk of Tesla’s solar push

Investing.com -- Shares of First Solar are down more than 13% on Thursday on the prospect of Tesla building large-scale solar manufacturing capacity. Tesla’s push could weigh on long-term pricing expectations of First Solar.

BMO Capital Markets downgraded the stock to Market Perform from Outperform cutting its price target on First Solar to $263 from $285.

Tesla CEO Elon Musk’s had commented at the World Economic Forum about building a vertically integrated solar manufacturing base.

Musk in earnings call Wednesday said Tesla was planning to work toward 100 gigawatts a year of solar cell production, integrated across the supply chain from raw materials to finished panels. BMO analysts say the effort could materialize over the next few quarters.

Tesla has a track record of rapidly scaling clean energy manufacturing in the US, which raises the risk to First Solar’s competitive positioning.

The timing and scale of any excess Tesla solar module capacity, and whether it would be sold to third parties, remain uncertain.

The potential for additional supply could pressure long-term module pricing or act as an overhang on First Solar shares.

Stock downgrade comes as BMO’s thesis on First Solar had increasingly relied on higher US module average selling prices.

BMO estimates the stock is discounting a terminal module price of about $0.29 per watt, following a 56% rise in the shares over the past 12 months. Recent backlog and bookings have been priced in the $0.30 to $0.33 per watt range.

BMO said its base case assumes US utility-scale solar capacity growth of about 45 to 50 gigawatts per year.

First Solar currently has about 14.1 gigawatts of US capacity, while T1 Energy is expected to reach 2.1 gigawatts of integrated solar manufacturing capacity by the end of 2026, with scope to add another 3.2 gigawatts.

The firm said any carve-outs or softer outcomes from pending Section 232 tariffs on polysilicon and related products could also dilute upside to US module prices.

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