J.P. Morgan has recently upgraded First Solar (NASDAQ: FSLR) stock from Neutral to Overweight, setting a price target of $220. According to the investment bank, the recent pullback in the stock’s price presents a favorable risk-reward profile for investors. First Solar’s strong backlog, extending well into the future, provides significant visibility into medium-term growth prospects.
While J.P. Morgan acknowledges potential longer-term risks associated with new U.S.-based manufacturing being incentivized by Inflation Reduction Act domestic content guidelines, the bank’s analyst Mark Strouse believes that the stock offers near-term value. Strouse points out that the overall solar industry has experienced a decline due to rising interest rates and concerns over developer costs and access to capital, especially after NextEra Energy Partners’ reduced guidance.
Strouse favors utility-scale solar as a preferred exposure to alternative energy and has named Array Technologies (ARRY), Shoals Technologies (SHLS), and Nextracker (NXT) as his top picks. He suggests keeping an eye on these companies ahead of their upcoming earnings announcements.
In addition, Strouse notes that NextEra Energy Partners’ decision to lower its targeted growth is specific to that particular company and not indicative of the broader industry. Concerns over CEPF refinancing needs have led to a higher cost of capital, but NextEra Energy, the parent company, has stated that its project development plans remain unchanged.