It's been a tough past few days for First Solar (FSLR -0.59%) shareholders. And understandably so. Investors suspect pro-oil President-elect Donald Trump could also prove to be unsupportive of renewable energy. Most clean energy stocks are down since his Nov. 5 election, in fact, on this worry. First Solar has been no exception to the industrywide sell-off.
This weakness, however, is also ultimately a buying opportunity for investors interested in owning a piece of the solar panel maker, or in adding exposure to the solar industry as a whole. The solar power movement is too big and too well-developed for Donald Trump to bring to a halt now.
First Solar is also positioned to sidestep one of the top actions the president-elect could take to disrupt the solar industry's growth.
Solar is just too competitive to stop now
Don't misunderstand. Trump certainly has enough authority to rattle the solar power business. He can't end it, though. He'll even be hard-pressed to slow its current growth.
See, contrary to a common assumption, solar power is no longer leaps and bounds more expensive than more common forms of energy production. Data gathered by Wood Mackenzie and reported by the U.S. Department of Energy indicates that utility-scale solar power is now in line with the cost of natural gas and coal-fired power, in fact.
That's a key reason the Solar Energy Industries Association says the United States' solar power production capacity grew a record-breaking 32.4 gigawatts last year. Indeed, for the first time ever, solar also accounted for over half the country's growth of its electricity-generating potential. This growth has continued to accelerate through 2024 too, despite economic headwinds.
The irony? Solar is growing like wildfire in several so-called "red" states like Texas, Oklahoma, and Kansas that picked Trump to be president during the recently ended election cycle specifically because it's the cheapest means of expanding utility-scale power production. To the extent voters picked Trump for economic reasons, they'll appreciate whatever leads to lower utility bills as well.
Legally limited, with little incentive to stand in its way anyway
The 2022 passage of the Inflation Reduction Act is admittedly fueling at least some of this growth, by virtue of offering taxpayers a tax credit of up to 30% of the cost of a solar power system. The IRA also financially incentivizes utility-scale solar power projects as well as the manufacturing of solar panels.
And this raises an important detail about solar power's future. That is, while Trump can undo any of President Biden's executive orders that may promote renewable energy (such as Biden's goal of making the federal government's fleet of vehicles 100% zero-emission by 2035), he can't unwind voted-upon legislation -- like the IRA -- without new legislation to undo the old. To this end, there doesn't appear to be enough political will at this time to undo a law that backs a movement that's already well supported and reducing utility costs anyway; Pew Research says two-thirds of Americans are for the advancement of alternative energy sources.
It's also worth noting that Donald Trump's pro-oil stance doesn't inherently mean he's anti-solar. The nation's largest-ever solar power project's plans (Solar Partners XI's 690-MW photovoltaic facility near Las Vegas) materialized in early 2020, while Trump was still in office his first time around. If nothing else Trump is pragmatic about anything that moves the economy forward.
But tariffs? Although unspecific as well as far from being certain -- Trump argues the mere threat of tariffs is enough -- First Solar is mostly immune to their impact anyway. While the company does require some imported materials that may be subject to such tariffs, it's an American manufacturer mostly serving the North American market, where the company believes over 90% of immediate revenue opportunities await.
The market's overestimating the risk, underestimating First Solar
There are risks to be sure. If nothing else, the transition from any President to another invites some degree of disruption, for example. It's not inconceivable that the upcoming shift to a largely right-leaning Congress and White House could throw some unexpected curve balls at the solar power industry.
The more likely scenario, though, is the continued expansion of the business that's ultimately rooted in necessity. The Energy Information Administration suggests the United States' need for electricity is set to reach records this year, and then repeat the feat next year, with artificial intelligence data centers driving about half of this growth.
This still only scratches the surface of the need, though, and First Solar's opportunity. The Energy Information Administration expects renewables like solar and wind to account for half of the country's power-production capacity expansion between now and 2050, when they will collectively generate roughly half of the United States' total electricity output. Solar will be the single-biggest source of domestic power by then, accounting for around one-third of the nation's electricity production.
Or as energy fellow at the University of Houston Ed Hirs more plainly explained it to Reuters: "I don't think a Trump president can slow the transition. This is well under way."
The kicker: First Solar's Cadmium Telluride (CdTe) photovoltaic panels makes its design and production process more complicated and more costly than that of more conventional silicon panels. This technology proves more durable, though, while at the same time delivering more power. Utility-scale buyers are increasingly seeing these panels as an investment rather than an expense.
Data source: StockAnalysis.com. Chart by author.
Now all of a sudden First Solar's stumble since early November and its much bigger 37% pullback from June's peak looks like an entry opportunity.
The analyst community agrees, anyway. Undeterred by political rhetoric and handwringing, most of them still consider First Solar stock a strong buy, sporting a consensus price target of $280.79. That's almost 50% above the stock's present price.
