Arizona-based First Solar (NASDAQ:FSLR) has strung together a pretty impressive run over the past six months. After struggling early this year, First Solar stock has rewarded shareholders with triple-digit gains since May. Even though the stock took a bit of a drubbing at the close of October, its gain since the first week of May now stands near 110%. That performance makes this photovoltaic solar solutions provider worth looking at.
Why didn’t FSLR make my June list of “The Top 4 Solar Stocks to Buy Now”? The timing wasn’t right. There were only four companies on the list, which narrows the field considerably. And at the time, First Solar stock was struggling to make it back to January levels.
Now? It’s a different ball game. First Solar hasn’t just regained its January level, it is up nearly 58% for 2020. That’s the kind of gain that makes investors take notice. Is now the time to consider adding FSLR to your portfolio? Let’s have a look.
A New Administration Brings Hope
Solar stocks have been seeing impressive growth in 2020. That runs contrary to past cycles, when dropping oil prices have resulted in a loss of interest in solar power. This year is very different. Despite an oil war that slashed prices, solar stocks like FSLR are seeing big gains. What gives?
A big part of the enthusiasm for solar stocks like FSLR has been tied to the election. President Donald Trump’s administration was very oil-friendly. However, President-Elect Joe Biden campaigned on a $1.7 trillion climate plan that focuses on renewable energy. This includes tax breaks for homes and businesses that adopt solar power, plus research and development (R&D) spending on battery technology to make mass-scale solar power plants more feasible. If implemented, the plan will be a huge boost for solar power. As a manufacturer of solar panels and a supplier of solar power systems, First Solar could be a major beneficiary.
Politics and Competition Could Put on the Brakes
There are two factors that have the potential to play spoiler in this scenario. The first is politics. Although it seems that Biden has cinched the presidency, his climate change plan is certain to face Republican opposition. That could end up watering down the version that is implemented.
Besides politics, there is the issue of China. Specifically, the fact that Chinese manufacturers have been flooding the market with cheap solar panels. That’s had the effect of pushing down prices globally. If that price pressure continues, it could take away business from American companies like First Solar or put pressure on margins. The effect has been countered in the U.S. by tariffs as part of the trade war with China, but it’s a problem that American solar companies will continue to face.
Bottom Line on First Solar Stock
First Solar’s performance since May has definitely been impressive. The question is whether that pace of growth is sustainable. And that’s where I have concerns.
Do I think First Solar has a bright future? Yes. There is no question that renewable energy is the future, and as America’s largest manufacturer of solar panels and solar power systems, First Solar is in a good place to take advantage of that. However, I do have some worry about the timeframe in which mass-scale solar adoption will take place. The Biden administration’s ability to implement his climate plan is going to have a big impact on how that plays out.
And even if things turn out in favor of big solar spending, there is still the problem of cheaper Chinese competition.
Historically, First Solar stock has been on a rollercoaster. It’s currently in five-year high territory and the risk is that if the current focus on solar-power spending gets pushed out to the future, FSLR will slide back down. Then again, it’s also possible that we will see action backing the talk, with solar power being pushed into mainstream adoption. The company’s recent high-profile deal to supply solar power plants for three auto plants in the Midwest is a sign that we may be approaching that elusive tipping point.
So, is this the time to consider adding FSLR to your portfolio? The stock certainly has the potential for continued growth. And it currently has an “A” rating in my Portfolio Grader. Just know that there are several factors at play here that could play spoiler and push that growth further into the future.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.