First Solar (FSLR) Stock Dips Despite Solar Sector Rally Amid US Tax Policy Shifts

First Solar's Unique Stock Movement Amid Solar Sector Rally#

First Solar, Inc. (FSLR experienced a notable stock price increase of +8.64%, closing at $185.25 on July 3, 2025, following a significant sector rally triggered by recent US legislative changes. Despite broader solar stocks rallying on the removal of the excise tax on solar and wind projects, First Solar's stock showed a divergence in market reaction due to its unique positioning as a domestic manufacturer utilizing proprietary CdTe thin-film technology.

This dichotomy reflects the complex interplay between sector-wide policy shifts and company-specific fundamentals. While many solar companies benefited from the reduced tax burden boosting project economics, First Solar's competitive advantage faced potential dilution from increased competition enabled by the excise tax removal.

Legislative Context: Excise Tax Removal and Inflation Reduction Act (IRA)#

The Senate bill removing the excise tax on renewable projects — dubbed the "Big Beautiful Bill" — spurred optimism across the solar sector, with stocks like Sunrun, SolarEdge, and Shoals Technologies surging by double digits. However, Mizuho analysts noted that this change could be a "slight negative for domestic manufacturers like First Solar" because it reduces the protective barrier against foreign competitors.

Simultaneously, the Inflation Reduction Act (IRA) continues to provide substantial incentives for domestic solar manufacturing, including the 45X Tax Credit. This credit supports First Solar's US-based manufacturing operations, offering important financial incentives for production of solar modules domestically.

Monetizing Tax Credit Transferability#

First Solar has strategically leveraged the IRA's provision allowing transferability of tax credits. By monetizing these credits through transfer agreements, the company enhances liquidity and capital availability, supporting its ongoing R&D and expansion efforts. This approach underpins First Solar's ability to translate policy incentives into tangible financial benefits, reinforcing its competitive stance despite sector-wide policy shifts.

Technological Edge: The Cadmium Telluride (CdTe) Advantage#

First Solar's proprietary CdTe thin-film technology differentiates it from peers primarily producing crystalline silicon (c-Si) panels. CdTe modules offer several advantages:

• Lower manufacturing costs due to less energy-intensive production
• Superior performance in high-temperature and low-light conditions
• Smaller environmental footprint because of reduced material usage and emissions

This technology translates into a lower levelized cost of energy (LCOE), especially for utility-scale solar projects, enhancing First Solar's project economics and long-term viability.

Competitive Comparison: First Solar vs. Nextracker#

While companies like Nextracker focus on solar tracking technology, First Solar's core competitive strength lies in its panel technology. The CdTe advantage enables First Solar to maintain a differentiated product offering that appeals to specific market segments, particularly those emphasizing sustainability and cost efficiency.

Financial Performance Highlights and Strategic Investments#

First Solar's financial results underscore a strong rebound and robust operational execution:

Metric	2024	2023	% Change
Revenue (USD Billion)	4.21	3.32	+26.75%
Net Income (USD Billion)	1.29	0.83	+55.52%
Gross Profit Margin	44.17%	39.19%	+4.98 p.p
Operating Margin	33.15%	25.83%	+7.32 p.p
EPS	11.77	N/A	+55.3%*

*EPS growth calculated based on net income growth and share count stability.

The company posted a net income of $1.29 billion in 2024, up +55.52% from $830.78 million in 2023, reflecting operational leverage and margin expansion. The gross profit margin improved to 44.17%, signaling enhanced production efficiency and pricing power.

Capital expenditures surged to $1.53 billion in 2024, reflecting First Solar's aggressive investment in expanding manufacturing capacity and technological upgrades. This contributed to a negative free cash flow of $308 million, though operating cash flow remained strong at $1.22 billion, indicating solid cash generation from core operations.

Balance Sheet and Liquidity Position#

First Solar maintains a robust balance sheet with a current ratio of 1.93x and a net cash position of approximately $902 million (net debt negative). Total assets increased to $12.12 billion in 2024 from $10.37 billion in 2023, driven by investments in property, plant, and equipment (PP&E), which rose to $5.41 billion.

Balance Sheet Metric	2024	2023
Cash & Equivalents (B)	1.62	1.95
Total Assets (B)	12.12	10.37
Total Liabilities (B)	4.15	3.68
Stockholders' Equity (B)	7.98	6.69

Despite a slight decrease in cash reserves, the company’s strong equity base and manageable long-term debt of $469 million underscore financial flexibility.

Market Reaction and Analyst Perspectives#

Following the excise tax removal, First Solar's stock initially dipped relative to peers, reflecting investor concerns over increased competition and margin pressure. However, the company's unique advantages—especially the CdTe technology and IRA-backed incentives—have led many analysts to maintain a positive medium- to long-term outlook.

Forward-looking estimates project:

• Revenue growth CAGR of 8.97% through 2029
• EPS CAGR of 22.1% over the same period
• Forward P/E multiple compressing from 11.49x in 2025 to 5.17x by 2029, suggesting improving earnings power

The consensus suggests that First Solar's fundamentals remain solid, supported by strong operational metrics, strategic tax credit monetization, and technological differentiation.

What Does This Mean For Investors?#

First Solar’s recent market behavior underscores the nuanced impact of policy shifts in the solar sector. While the removal of the excise tax broadly benefits the industry, it introduces competitive pressures that challenge First Solar's previously protected domestic advantage.

Nonetheless, the company's proprietary CdTe technology, combined with IRA-driven tax credits and strong manufacturing presence in the US, positions it well to capitalize on growing demand for utility-scale solar projects.

Investors should monitor:

• The evolution of US trade and tax policies affecting tariffs and subsidies
• First Solar's ability to sustain margin improvements amid competitive pressures
• Execution of capital expenditure plans and R&D investments
• Market adoption of CdTe technology relative to crystalline silicon alternatives

Key Takeaways#

• First Solar's stock price rose +8.64% on July 3, 2025, reflecting sector momentum but with unique company-specific factors influencing performance.
• The removal of the solar excise tax benefits the sector overall but may erode First Solar's competitive edge by leveling the playing field with foreign manufacturers.
• The Inflation Reduction Act's 45X Tax Credit and transferability provisions provide significant financial support, enabling liquidity and capital for growth.
• First Solar's CdTe thin-film technology offers a cost and environmental advantage, reinforcing its position in utility-scale solar markets.
• Financially, the company reported robust revenue and net income growth in 2024, alongside heavy capital investment for capacity expansion.
• Analysts forecast steady revenue and EPS growth through 2029, with improving valuation multiples indicating growing earnings confidence.

Sources#

• TheStreet - Solar Stocks
• Moomoo - FSLR News
• TipRanks - Excise Tax Drop