First Solar Positioned for Growth Amid Political Uncertainty, Analysts Say

First Solar, a leading player in the clean energy sector, may find itself in a favorable position should a second Trump administration take office, according to a recent analysis by Morgan Stanley. The firm suggests that investors should consider purchasing First Solar stock, which has seen a decline due to perceived risks surrounding the upcoming elections. Concerns have been raised that a Republican sweep could lead to the dismantling of the Inflation Reduction Act (IRA), a key piece of legislation that significantly benefits the company. Morgan Stanley highlights that First Solar is particularly vulnerable, with 81% of its projected net income for 2023 tied to domestic manufacturing tax credits established under the IRA. However, analyst Andrew Percoco argues that fears of a full repeal of the IRA are exaggerated. He points out that 90% of the IRA's investment funds have been allocated to districts controlled by Republicans, fostering bipartisan support for the law. While some elements of the IRA may face challenges, the domestic manufacturing credit crucial to First Solar's operations is likely to remain intact. Additionally, Percoco notes that First Solar could benefit from increased tariffs on Chinese imports under a Trump administration, a factor that the market may not fully appreciate. He estimates that the domestic tax credits contribute approximately $101 to First Solar's current share price of $220.24, with potential risks to about $90 per share if the credits were to be repealed by the end of 2025. Despite these uncertainties, Morgan Stanley remains optimistic about the renewables sector, suggesting that ongoing investments in new power generation could mitigate risks associated with tax credit changes.