First Solar Stock (FSLR) Hits ‘Sentiment Limit,’ Warns Analyst

Renewable energy proponent First Solar (FSLR) has delivered exceptional performance over the past nine months, with shares climbing from less than $150 to ~$250 today, a gain of over 60%. That said, the bulk of the easy gains now appear to be behind us. Consensus estimates point to relatively limited upside from current levels, even as near-term earnings growth remains solid and resilient.

At this stage, the risk-reward profile looks increasingly balanced rather than compelling. Capital is likely better deployed into pre-inflection value names or opportunities with materially stronger long-term growth runways. Within the context of the current macroeconomic cycle, First Solar no longer stands out as an attractive entry point, leaving me neutral on the stock.

An American Energy Winner Amid the AI Boom 

Solar power is emerging as one of the best energy sources in the world for cost and speed, even though grid upgrades and storage limits currently cap its dominance. First Solar is already benefiting from a booming data center market, thanks to the proliferation of AI. It’s been a remarkable year for the stock as the Trump administration bolstered American manufacturing projects and supported First Solar amid the current U.S. capex boom that demands abundant energy. 

First Solar has 79.2 GW of total booking opportunities, including 17.8 GW at the mid-to-late stage. Given the strong demand environment, management has decided to increase capacity to 25 GW in 2026, with an additional 3.7 GW of U.S. module finishing line capacity ramping in 2027. 

However, the company has been, and still is, heavily dependent on Section 45X tax credits, which are slated to phase down after 2029. As the income from these tax credits is about equal to the company’s forward operating income, the long-term investment horizon is more fragile than I’d like in the current environment of macro equity market overvaluation. 

FSLR Stock Isn’t as Cheap as it Seems

The framework is straightforward: once a stock is widely viewed as having little to no upside relative to consensus expectations, the risk-reward profile typically deteriorates. That doesn’t mean further gains are impossible—only that they become less frequent and harder to sustain. In First Solar’s case, my independent base-case analysis also points to minimal upside, particularly if the forward P/E multiple compresses as growth naturally decelerates, which I view as a likely outcome.

While the stock may appear inexpensive at first glance, valuation can be misleading when applied to cyclical businesses. As such, First Solar’s forward P/E trading roughly 29% below the sector median should not be taken as a clear signal of undervaluation. The discount exists for valid reasons, such as the company’s high exposure to policy risk and sensitivity to macroeconomic cycles. Although the AI-driven capex boom could create long-term pressure on energy supply, near-term investment continues to favor traditional energy sources, limiting solar’s upside potential for now.

To be fair, growth remains robust, with long-term forward EPS CAGR estimated at 32.6%, compared with 15.9% for the broader sector. However, as a sentiment-driven investor, I place significant weight on analyst behavior. The recent wave of downward estimate revisions over the past month has weakened momentum and reduced the attractiveness of the setup. As a result, I’m downgrading the stock to a Hold rating.

Why FSLR Could Make a Comeback

The IEA projects global electricity demand from data centers will more than double by 2030 to ~945 TWh, and renewables and natural gas are set to take the lead in meeting data-center demand due to their cost competitiveness and availability. 

However, my main concern is that during an AI capex digestion period, First Solar stock would definitely be hit hard. It’s probably best to wait, then, for such a “reset” to occur, given that the current S&P 500 (SPX), which includes First Solar, is currently trading at +2 standard deviations higher than the modern-era market average. Historically, anywhere close to this has never generated a positive return over the following 5 years. In the following chart, AMVI stands for “Aggregate Market Value Index.”

Macro valuations are the main reason why I’m being incredibly selective at the moment with my investments, and only choosing the ones that I think have favorable risk-to-reward and low cyclicality. FSLR’s beta is 1.6, so in an AI capex unwind, it would be hit particularly hard.

Is First Solar a Good Stock to Buy?

On Wall Street, First Solar has a consensus Moderate Buy rating based on 18 Buys, four Holds, and one Sell. The average FSLR price target of $277.45 indicates a 15% upside for 2026. This is certainly not bad, and it can materialize quickly, but it isn’t the medium-term compounder in terms of valuation dislocation that I’d want. 

See more FSLR analyst ratings

Greener Pastures Elsewhere

First Solar is a high-quality U.S. manufacturer with real demand tailwinds from AI-driven power needs and favorable near-term policy support. However, after a 2x rally, the valuation reflects that upside, leaving investors exposed to policy risk, macro compression, and earnings normalization as Section 45X credits phase down.

Consensus upside is modest, and analyst revisions have turned less favorable, so there’s little margin of safety here. Capital is better deployed in pre-inflection opportunities; as such, First Solar is a stock investors may want to steer clear of.