Commerce Bid Rejection For Solar Tariffs Seen As Negative For First Solar

Solar stocks are in the spotlight on Thursday after U.S. trade officials rejected an effort by a group of domestic solar manufacturers to seek tariffs on panels imported from some South Asian nations, namely Malaysia, Thailand, and Vietnam as the group believes Chinese companies have shifted production to those countries to avoid U.S. duties on solar cells and panels made in China. Commenting on the decision, Roth Capital analyst Philip Shen said it sees it as an incremental negative for First Solar (FSLR) and an incremental positive for nearly every other company in his universe that serves the U.S. His peer at Morgan Stanley also sees the news as a negative outcome for First Solar and Maxeon Solar (MAXN) since these tariffs could have raised prices "meaningfully" for their U.S. competitors.

NEGATIVE FOR FIRST SOLAR, MAXEON: Morgan Stanley analyst Stephen Byrd views the Department of Commerce's decision to deny a request from a group of U.S. solar module manufacturers to take up a case regarding Chinese companies allegedly circumventing U.S. trade restrictions on solar cell and module imports as a negative outcome for First Solar and Maxeon Solar since these tariffs could have raised prices "meaningfully" for their U.S. competitors. Overall, the rejection is consistent with his bearish view on First Solar, with the analyst seeing further downside policy risk in coming months. Byrd keeps an Underweight rating $61 price target on First Solar shares.

Meanwhile, he believes the news is positive for other solar players in the U.S. as this decision will allow business to move forward more smoothly and lower risks of project delays for large scale developers such as NextEra Energy (NEE) and AES Corp. (AES), rooftop installers Sunrun (RUN) and SunPower (SPWR), and the component manufacturers supplying these projects such as Shoals Technologies (SHLS), Array Technologies (ARRY) and SolarEdge (SEDG).

Noting that over the past couple of weeks, his checks with utility-scale players were suggesting "a substantial amount of pain for the industry," Roth Capital analyst Philip Shen told investors that he believes the news serves as a source of near-term relief. Shen's checks also suggest that the demise of the anti-circ case increases the probability of the Section 201 extension in January/February and that there is a small chance the case gets refiled.

The analyst sees the decision as an incremental negative for First Solar and as an incremental positive for nearly every other company in his universe that serves the U.S. This would include Array Technologies, Canadian Solar (CSIQ), Daqo New Energy (DQ), Enphase Energy (ENPH), FTC Solar (FTCI), Generac (GNRC), Hannon Armstrong (HASI), JinkoSolar (JKS), Sunnova Energy (NOVA), Sunrun, SolarEdge, Shoals Technologies, ReneSola (SOL), SunPower, Sunlight Financial (SUNL), and Sunworks (SUNW).

PRICE ACTION: In Thursday morning trading, shares of First Solar have gained 2% to $113.24, while Maxeon stock has jumped over 5% to $22.93. Also higher are SolarEdge, Array, Canadian Solar, Shoals, Enphase, JinkoSolar, Sunnova, Sunrun, Sunworks, and FTC Solar.

Disclosure: None

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