Bernstein reiterates Underperform on FSLR, target price $217/sh

Overview

This report is Bernstein's response to market pushback following its initiation of coverage on First Solar, Inc. The report acknowledges that FSLR may benefit from US Section 232 tariffs, 45X tax credits, and growth in the US utility-scale solar market, but argues that these positives are insufficient to overturn its Underperform view. Bernstein maintains its Underperform rating and $217/sh target price on FSLR.

Core views

The core view is that FSLR's bull case mainly depends on three assumptions: Section 232 tariffs restrict imports and protect domestic module prices, 45X tax credits are extended beyond 2032, and US utility-scale solar demand continues to grow. Bernstein believes Section 232 tariffs are more likely to translate into market share gains rather than both higher share and higher ASP at the same time; 45X tax credits contribute too much to valuation and are set to phase down after 2030 under current policy; and the long-term technology moat is also threatened by the commercialization path of Perovskite and Si-Perovskite.

Analysis framework

The report responds to the pushback through policy scenarios, market share forecasts, tax credit discounting, SOTP valuation, and technology pathway comparisons. The analysis does not deny FSLR's policy benefits or US market growth, but instead tests whether these factors can support the current valuation and more optimistic earnings assumptions.

Methodology notes

• Valuation methodsSOTP sum-of-the-parts valuation

  Values and sums individual components including gross profit excluding tax credits, 45X tax credits, order backlog, TOPCon licensing optionality, and potential cash flow from the BP settlement.

  The report applies a 9x multiple to gross profit excluding tax credits, assumes 45X tax credits begin phasing down in 2030, uses a 10% discount rate for backlog, a 12% discount rate for TOPCon licensing, and probability-weighted cash items to derive a $217/sh target price.

• Policy scenarioSection 232 and 45X tax credit sensitivity

  Assesses the impact of changes in tariff and tax credit policies on market share, ASP, margins, and valuation.

  The report believes Section 232 tariffs could help FSLR increase US market share, but higher ASP may suppress demand; a 45X extension is the key upside risk, but the base case follows current policy.

• Technology competitionComparison of CdTe, C-Si, and Perovskite pathways

  Compares FSLR's CdTe thin-film technology with C-Si and next-generation Perovskite pathways in terms of efficiency, supply chain, and commercialization risk.

  CdTe has advantages in manufacturing process, energy consumption, durability, and US supply chain, but its peak efficiency is about 23%, versus about 27% for C-Si; FSLR Series 6 is about 19%, and Series 7 about 19.3%.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• First Solar, Inc. (FSLR.US)

  Research subject; the company is a US solar thin-film module manufacturer.

  Strengths

  Its domestic US CdTe supply chain reduces import and tariff risk; its manufacturing process is relatively streamlined with lower energy consumption; it may benefit from Section 232 tariff protection, 45X tax credits, and growth in US utility-scale solar demand.

  Weaknesses

  Valuation is highly dependent on 45X tax credits; the phase-down of tax credits after 2030 would require significant margin improvement; CdTe efficiency is below C-Si, and its long-term technology moat is viewed as weak.

  Comparison

  Compared with C-Si modules, CdTe has advantages in supply chain, manufacturing speed, and high-temperature performance, but its peak efficiency of about 23% is below C-Si's roughly 27%; if Si-Perovskite commercializes faster, it could weaken the advantage of FSLR's single-junction technology pathway.

  Risks

  Upside risks include an extension of 45X, favorable outcomes from TOPCon patent actions, and faster-than-expected progress in Perovskite or efficiency improvements; downside risks include higher ASP suppressing demand, tax credits phasing down on schedule, and long-term technological substitution.

Key data

• RatingUnderperformBernstein reiterates its Underperform view on FSLR.
• Target price$217/shBased on the SOTP valuation method.
• 45X tax credit valuation$111/shAbout 50% of the report's valuation, estimated through 2032 at a 9% discount rate.
• 45X phase-down assumptionPhase-down begins in 2030The base case follows current policy.
• FSLR US shipment market share assumptionRising from about 30% to nearly 50%The model assumes a significant increase in market share by the end of this decade.
• Backlog valuationAbout $10/shThe report assigns value to contracted order backlog.
• Potential TOPCon licensing value$9/shThe report treats additional TOPCon licensing deals as a potential source of value.
• CdTe vs. C-Si efficiency comparisonCdTe peaks at about 23%, C-Si at about 27%FSLR Series 6 is about 19%, and Series 7 about 19.3%.
• Section 232 tariff decision timingDelayed to August 2026The US Department of Commerce investigation had originally been expected to reach a decision in June 2026.

Impact & implications

The investment implication is that while FSLR has policy protection, a US supply chain, and exposure to utility-scale solar growth, its valuation is highly sensitive to 45X tax credits and margin improvement. If policy is extended or patent licensing progress exceeds expectations, the Underperform view faces upside risk; if tax credits phase down on schedule and the technology efficiency gap persists, current valuation pressure becomes more apparent.

Risks

• If 45X tax credits are extended beyond 2032, FSLR's valuation would rise significantly and weaken the Underperform thesis.
• If TOPCon patent actions are favorable to FSLR, they could bring more licensing income or competitive constraints.
• If Perovskite solar cell or panel efficiency achieves a major breakthrough, it could improve FSLR's margins and create upside risk.
• If Section 232 tariffs support both higher ASP and demand without suppressing it, FSLR earnings could outperform the report's base assumptions.
• If Si-Perovskite tandem technology commercializes quickly, it could create competitive pressure on FSLR's CdTe pathway.

What to watch

• The outcome of the US Section 232 polysilicon and derivative imports tariff investigation around August 2026.
• Whether 45X tax credits are extended beyond 2032, and any related policy text changes.
• Whether FSLR's US shipment market share can rise from about 30% to nearly 50%.
• Whether ASP changes are accompanied by demand slowdown, especially the pace of US utility-scale solar installations.
• Progress in CuRe technology, Series 7 capacity conversion, and Perovskite R&D.
• TOPCon patent actions, licensing deals, and potential cash flow from the BP settlement.