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Will Biden’s infrastructure bill re-energise First Solar stock?

Is First Solar [FSLR] stock set to burn brighter after the passing of US president Joe Biden’s infrastructure bill, with the wider green sector poised to benefit?

With increasing focus on the sector, the climate-focused bill could be further encouraging news for First Solar’s stock, which has already climbed more than 35% over the last six months, and could stand to make further gains. 

While the stock is up less than 3% year-to-date as at Friday 26 November’s close, beyond that, its growth has been largely consistent. If the US infrastructure bill and the recent United Nations climate change conference (COP26) in Scotland begin to have a serious impact on energy markets, could First Solar be a promising long-term pick for investors looking for a reliable green investment?

 

 

 

What’s happening with First Solar stock?

While First Solar's stock is up just 2.88% year-to-date, it’s climbed an impressive 36.35% over the last six months, after closing last week at $104.53. Last week however, the shares dropped -7.37%, marking a decline of -8.92% over the last month. Despite the recent fall back, First Solar’s stock has leapt 54.31% from the 52-week low of $67.71 on 11 May.

First Solar’s recent fall is reflected in declines across the wider solar sector. Our ETF performance scanner shows that the Solar theme, represented by the Invesco Solar ETF [TAN], was the biggest faller last week among more than 30 tracked themes, sliding -7.46%. First Solar stock is currently the third largest holding in the fund, with a 6.73% weighting, behind Enphase Energy [ENPH], which has a 14.38% weighting and SolarEdge Technologies [SEDG], with a 6.73% weighting.

54.31%

First Solar stock's increase since 11 May

 

 

Rays of light for renewable stocks?

The US House of Representatives’ passing of the $1.75bn ‘Build Back Better’ bill, which includes $555bn to pump into climate programs, is a key hurdle in the US government’s fight against climate change and cutting greenhouse gas emissions.

As part of Biden’s updated COP26 pledge, the US aims to slash greenhouse gas emissions at least 50% below 2005 levels by 2030. This target is deemed a “quite ambitious” goal by the World Resources Institute director of International Climate Initiative, David Waskow, reports NBC News. Experts say the success of US infrastructure projects and the eventual outcome of the Build Back Better Act – which could ultimately still be scaled back – are both crucial in meeting the country’s emissions goals.

The bill itself offers tax credits for the installation of renewable energy systems, including solar and wind, as well as for buying electric vehicles. It also provides financial incentives for domestic manufacturing of renewable technologies, such as solar panels and wind turbines.

Although the bill is likely to see some modifications in the Senate, the direction of travel should still offer a clear fillip to the clean energy sector, including First Solar stock.

57%

First Solar's net income growth over the last 5 years

 

 

What are analysts saying about First Solar stock?

First Solar’s net income has grown an impressive 57% over the last five years, reports Simply Wall St, thanks in no small part to a significant rate of reinvestment, given that First Solar doesn't pay a dividend to its shareholders. Despite that, its latest Q3 results released on 4 November disappointed, as revenue and earnings per share missed analysts’ expectations, with the company citing freight shipping supply chain issues. First Solar did however reiterate its full-year 2021 net sales guidance of between $2.88bn and $3.1bn, reports CNBC.

The average price target on First Solar stock is $112.07 according to the Wall Street Journal (WSJ), which represents a 5.81% rise from last Friday's closing price of $105.92. The stock has a full range of broker ratings, with six 'buy', one 'overweight', 14 'hold', one 'underweight' and three 'sell' ratings, for an overall 'hold', according to the WSJ.

Disclaimer Past performance is not a reliable indicator of future results.

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