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First Solar could emerge as clean energy winner under a second Trump administration, and investors should consider buying the stock on the cheap after its recent sell-off on “overblown” election risks, according to Morgan Stanley. First Solar has tumbled 12% since President Joe Biden ‘s disastrous debate performance on June 27, as speculation grows that Donald Trump is on a path to win the election. Some investors fear Republicans will try to dismantle the Inflation Reduction Act if they sweep Congress and the White House. FSLR YTD mountain First Solar shares year to date. First Solar is one of the stocks most exposed to the IRA, with 81% of its 2023 net income relying on domestic manufacturing tax credits under the law, according to a Goldman Sachs note Monday. A substantial portion of the company’s earnings, then, would be at risk if the IRA is fully repealed. But the risk of Republicans repealing the IRA is overblown, Morgan Stanley analyst Andrew Percoco told clients in a research note Tuesday. Some 90% of the investment dollars under the IRA have gone to GOP-controlled districts, which has created bipartisan support, he said. While some portions of the law may be at risk, the domestic manufacturing credit that have supported First Solar will likely remain in place, the Percoco said. Republicans and Democrats are prioritizing manufacturing incentives to support energy independence and job creation, Goldman Sachs analysts led by Brian Lee told clients. First Solar benefits from Trump tariffs Investors are missing how First Solar actually stands to benefit from tougher tariffs against China under a Trump administration, he said. “We believe that this is vastly underappreciated by the market for FSLR as the concerns about IRA repeal appear to be exerting a greater downside force on valuation than the potential pricing upside realized from a potential protectionist administration,” Percoco wrote. Tougher tariffs would enhance First Solar’s position in the U.S. market as the largest, vertically integrated solar panel manufacturer, Percoco said. Higher tariffs on Chinese solar module imports could result in higher average selling prices for First Solar and limit downside to its earnings, according to Goldman. Morgan Stanley estimates that the domestic tax credits currently represent about $101 of First Solar’s $220.24 share price. Republicans probably wouldn’t be able to repeal the credit until the end of 2025, which means about $90 per share is at risk, according to Morgan Stanley. Even in the unlikely scenario that the credit is repealed, the underlying power demand trend from manufacturing, data centers, crypto mining and electrification will continue, according to the investment bank. Renewables will continue to benefit from the build out of new power generation, and this could outweigh the risks to changes in the tax credits, according to Morgan Stanley. “We see an attractive buying opportunity for FSLR at current levels,” Percoco said, with Morgan Stanley seeing limited downside of about 5% from where the stock is trading right now. Morgan Stanley has a price target of $331 for First Solar, implying 50% upside from Monday’s close of $220.24. Goldman has a target of $302, suggesting 37% upside for the company.
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