First Solar Misses on Q1 Earnings: Should You Hold or Sell the Stock?

Core Viewpoint - First Solar Inc. (FSLR) reported disappointing earnings and sales for Q1 2025, falling short of Zacks Consensus Estimates, and has lowered its sales guidance for 2025 due to new tariffs impacting its manufacturing locations [1][2] Financial Performance - FSLR's shares have decreased by 22.7% over the past year, outperforming the Zacks solar industry's decline of 40.3%, but underperforming the broader Zacks Oil-Energy sector's decline of 9.2% and the S&P 500's return of 10.3% [3] - The Zacks Consensus Estimate for Q2 2025 revenues and earnings indicates a solid improvement of 22.4% and 28.9% year-over-year, respectively [12] - Current estimates for FSLR's sales and earnings for 2025 are $5.48 billion and $18.22, reflecting a year-over-year growth of 30.33% and 51.58%, respectively [13][14] Manufacturing and Capacity Expansion - FSLR is expanding its manufacturing capacity by approximately 4 GW, including the construction of a fifth U.S. manufacturing facility expected to commence operations in the second half of 2025 [8][10] - The company has recently started operations at its fourth manufacturing facility in the U.S. and expanded existing facilities in Ohio and India [7] Market Sentiment and Challenges - Manufacturing issues with certain Series 7 modules produced in 2023 and 2024 may lead to premature power loss, negatively impacting market sentiment [6] - The rapid expansion of manufacturing capacity by competitors in China and Southeast Asia has created a supply-demand imbalance, affecting FSLR's operating results [5] Valuation - FSLR's forward 12-month price-to-sales (P/S) ratio is 2.52X, which is a premium compared to its peer group's average of 0.71X, indicating that investors are paying a higher price relative to expected sales growth [15]