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First Solar Inc (Nasdaq: FSLR), a leading player in the solar energy sector, is navigating a complex landscape shaped by both political dynamics and legislative actions. 

The company, which saw more than 80% of its net income last year attributed to domestic manufacturing tax credits from the Inflation Reduction Act (IRA), is now facing a nuanced future. 

While the Biden Administration’s IRA has been a significant boon for First Solar, analyst Andrew Percoco from Morgan Stanley suggests that a potential Trump presidency might still benefit the company, presenting a mixed bag of opportunities and challenges.

IRA’s impact on First Solar’s financial performance

Shares of First Solar have faced a notable 25% decline since mid-June, particularly following the June 27th debate between President Biden and former President Donald Trump. 

Investors have expressed concerns that a Republican return to the White House could jeopardize the IRA’s provisions, which have been crucial for First Solar’s financial health. 

However, Percoco believes these fears may be overstated. He points out that GOP-controlled districts have actually received a significant 90% of IRA investments, underscoring bipartisan support for the act.

Despite potential political shifts, Percoco is confident that the IRA’s domestic manufacturing tax credits, which are pivotal for First Solar, are unlikely to be at risk. 

His analysis remains bullish on First Solar’s stock, with a price target of $331—reflecting a potential upside of approximately 50%.

Potential benefits from higher tariffs on China

Another factor that could play in First Solar’s favor is the possibility of increased tariffs on Chinese solar imports under a Trump administration. 

Percoco argues that such tariffs could enhance First Solar’s market position as the largest vertically integrated solar company in the U.S. By raising the cost of imported solar components, these tariffs would likely boost First Solar’s profitability and help stabilize its earnings.

The role of growing power demand

Additionally, Percoco highlights that the ongoing surge in power demand, driven by advancements in electrification, cryptocurrency mining, and AI data centers, will continue to support clean energy companies, including First Solar. 

This demand trend, coupled with First Solar’s strong earnings performance—$2.20 per share for the first quarter, marking a remarkable 450% year-over-year increase—signals robust growth potential.

Financial performance and market expectations

In early May, First Solar reported earnings of $2.20 per share, significantly outperforming the $1.90 forecasted by analysts. 

With quarterly revenues of $794 million, the company exceeded both its previous figures and market expectations. 

However, it fell short of expectations for the full-year outlook, a factor investors will need to watch closely.

While First Solar shares currently do not offer a dividend yield, the company’s strategic positioning and the evolving political and economic landscape present a complex but promising scenario for investors. 

As the solar industry continues to grow and adapt, First Solar remains a key player in shaping the future of clean energy in the U.S.

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