Top solar stock First Solar (FSLR) has surged approximately 10% in September. The stock is currently trading close to its 52-week high and might continue to march upward.
First Solar stock’s attractive valuation
First Solar stock looks attractive from the valuation perspective. It is trading 19x its forward earnings and looks significantly cheaper than its historical valuation average.
First Solar management increased its earnings guidance for the rest of the year despite reporting losses in Q2. It increased its operating income guidance to $290 million–$340 million from its earlier estimate of $260 million–$310 million for 2019.
The company kept its EPS guidance range of $2.25–$2.75 for 2019, an increase of a mammoth 80% from 2018. In our view, First Solar stock looks attractively valued, given its solid potential earnings growth.
SunPower stock is trading more than 90x its forward earnings and looks exorbitantly expensive. Sunrun is trading 36x its earnings for the next 12 months. Among these three, First Solar looks comparatively undervalued at the moment. First Solar, SunPower, and Sunrun collectively form almost 20% of the Invesco Solar ETF (TAN).
We expect the solar industry to flourish, with more investments and stronger demand for solar energy in the long term. According to SEIA and Wood Mackenzie’s Solar Market Insight Report, the total installed photovoltaic capacity in the US should more than double in the next five years.
First Solar stock is trading at $67.30, approximately 6% and 17% above its 50-day and 200-day moving average levels, respectively. The reasonable premium to both these key support levels underlines the strength in the stock. The stock recently broke above its 50-day level and might continue to soar.
On the downside, this level around $63.74 might act as a support in the short term. First Solar stock currently has an RSI (relative strength index) of 73, which indicates that the stock is trading in the overbought zone.
First Solar and peers: Price targets
FSLR stock offers a fair potential upside of 15% against its current market price of $67.30. Wall Street analysts have given it a mean price target of $77.10. Of the 15 analysts covering First Solar, seven analysts recommended it as a “buy,” three recommended it as a “strong buy,” and five recommended it as a “hold.” None of the analysts recommended it as a “sell” on September 24.
Analysts expect a massive downside of 25% from SunPower (SPWR) stock against its current market price of $15.01. It has a mean price target of $11.33.
Sunrun offers a handsome upside potential of approximately 28% based on analysts’ mean price target of $22.40. It closed at $17.54 on September 23.
Solar inverter makers have notably outshined solar panel makers this year. Shares of Enphase Energy and Israel-based SolarEdge Technologies are indeed on fire. SolarEdge stock touched a new all-time high last week. For the details, please read SolarEdge Stock Reaches All-Time High: Where to Now?