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First Solar stock jumps on earnings beat, strong demand

The solar industry has struggled this past year amid a pileup of panels and higher interest rates. Yet one outlier has been First Solar (FSLR), the largest US solar module manufacturer.

Shares of the Tempe, Ariz.-based company jumped 6% on Wednesday after posting better-than-expected quarterly earnings and upbeat guidance. The company expects revenue this year to come in between $4.4 billion and $4.6 billion versus analysts' expectations of $4.53 billion.

"Despite industry macro challenges, such as global oversupply and pricing volatility, we continue to see strong mid- to long-term demand, especially in the United States," First Solar CEO Mark Widmar said during the company's earnings call.

A worker applies tape to a solar panel at First Solar in Perrysburg, Ohio July 8, 2022. REUTERS/Megan Jelinger
A worker applies tape to a solar panel at First Solar in Perrysburg, Ohio, July 8, 2022. (Megan Jelinger/REUTERS) (REUTERS / Reuters)

The manufacturer caters to the utility sector with customers like NextEra Energy (NEE) and LightSource BP. Those types of contracts typically involve longer lead times than solar peers' residential or commercial agreements.


"Our current backlog, cumulatively oversold through 2026 and with bookings extending to the end of the decade, provides us with optionality in periods of pricing and policy uncertainty," First Solar CFO Alex Bradley said during the call.

"Put simply, if we did not book any more deals by the end of the year, we would remain sold out two years forward through 2025 and 2026," he added.

First Solar has been a major beneficiary of the Inflation Reduction Act, which allows domestic solar manufacturers to sell tax credits to other firms. Last year the company agreed to sell $687 million in tax credits to fintech company Fiserv (FI).

Wall Street analysts are bullish on the stock, with 25 Buy and 7 Hold recommendations. Still, First Solar shares have been dragged down 12% year to date amid an overall sector slump.

Last week, SolarEdge (SEDG) stock sank after the maker of inverters, which convert the energy generated by solar panels, posted weaker-than-expected revenue guidance for the current quarter due to a slowdown in residential demand and increasing inventories. CEO Zvi Lando said during the company's fourth quarter earnings call that he didn't expect significant changes to the market until interest rates decline.

Higher interest rates are impacting the renewable sector because clean energy projects are capital intensive. Installation loans are also more expensive.

To make matters worse, falling valuations are making it harder for companies to tap into public markets to fund their projects.

The Invesco Solar ETF (TAN) is down 18% since the start of the year as headwinds continue across the industry.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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