First Solar slides 10% as Jefferies downgrades stock on lower booking visiblity

Investing.com -- Shares of First Solar slumped 10% on Wed. after analysts at Jefferies said expectations for policy-driven upside in 2026 look richer than the likely reality as booking visibility weakens, and downgraded stock to Hold.

Optimism around Section 232 tariffs is likely to underwhelm investors, according to Jefferies.



The risk of carve-outs for Germany and other trading partners could dilute pricing benefits, alongside developers moving procurement decisions ahead of potential duties and foreign entity of concern rules.

These dynamics limit how much pricing uplift First Solar can realistically capture, raising downside risk to 2026 volume assumptions.

Jefferies said visibility into 2026 bookings remains limited after a difficult 2025 that saw guidance cuts, de-bookings and margin pressure.

Shares have rallied to 52-week highs, with gains of around 37% in last six months, as some regulatory headwinds eased. Jefferies sees little incremental policy support left to justify current valuations.

Investor focus is likely to shift toward execution and use of cash rather than further regulatory upside.

Excluding 45X credits, First Solar posted gross margins of about 20% in 2024 and is expected to exit 2025 closer to 11%, weighed down by logistics costs.

While management expects some of these costs to roll off in 2026, Jefferies flagged underutilisation at overseas facilities as a risk. Planned relocation of 3.7 GW of Southeast Asia capacity to the U.S. could introduce non-cash underutilisation charges, while reciprocal tariffs in India may further disrupt volumes.

Analyst questioned the long-term viability of international facilities while tariffs remain in place.

Free cash flow generation is improving, with net cash potentially reaching $10 billion by 2028 and $17 billion by 2030. But the timeline is too extended to act as a near-term catalyst for the shares, with capital deployment likely focused on completing manufacturing lines in 2026.

The brokerage cut its rating to hold and set a $260 price target, saying the stock trades near peak multiples at about 8.8x 2026 EV to EBITDA, leaving limited upside given the policy and volume risks it sees ahead.

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