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Investing.com -- Wolfe Research upgraded First Solar (NASDAQ:FSLR) to Outperform from Peer Perform and set a price target of $221 on the stock in a note on Tuesday.
The firm highlighted improved clarity on key tax credits and favorable policy momentum for the company.
“We’re upgrading FSLR on better clarity on 45X credits for the first time since election year politics started in early 2024,” Wolfe analysts wrote in a note Monday.
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The firm had long viewed risks around the Inflation Reduction Act (IRA) as an overhang on First Solar.
But they explained that a recent proposal by the House Ways and Means Committee, which slightly shortens the 45X tax credit timeline, is seen as a net positive.
“We have been wary of IRA risks for 18 months on FSLR and view the House Ways & Means slight shortening of 45X credits as a relief,” the analysts said.
Wolfe estimates First Solar could earn roughly $10 billion in 45X credits through 2031, or about $92 per share.
“FSLR’s domestic moat remains well intact as the only domestic solar module manufacturer of scale, and also doesn’t rely on foreign components such as cells or wafers,” the firm added.
Proposed Foreign Entity of Concern (FEOC) restrictions, which may limit the use of Chinese components, were also viewed as a tailwind.
“The bill’s proposed FEOC restrictions are relatively strict and another good signal that it will be tough for Chinese manufacturers to compete in the U.S., further strengthening FSLR’s competitive positioning.”
While the phaseout for 45X will now begin in 2029—one year earlier than previously proposed—Wolfe called the change “a minor headwind” and noted First Solar’s strong balance sheet reduces the need to monetize credits before 2027.
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