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First Solar (NASDAQ:FSLR) -1.7% in Wednesday’s trading even as Citi upgraded the stock to Neutral/High Risk from Sell/High Risk, saying its thesis of poly falling below $10/kg leading to lower panel pricing has played out, implications of domestic content guidance are now fully reflected, near-term financing concerns have been addressed, and Q2 consensus earnings appears achievable.
However, Citi’s Vikram Bagri and Theodore Giletti said they do not see meaningful upside and believes 45X clarification combined with falling panel prices should lead to stock weakness.
The analysts said they prefer Canadian Solar (CSIQ) over First Solar (FSLR), as the former should benefit from the steep decline in poly prices and a weaker Chinese currency.
Citi also opened a downside catalyst watch on SunPower (NASDAQ:SPWR), believing the company likely will miss Q2 adjusted EBITDA estimates, and initiated Sunnova Energy (NOVA) with a Neutral rating.
The fundamental landscape for residential companies has remained difficult, the Citi team said, expecting a second rate hike that will further raise the cost of capital for solar installers and may coincide with the bottoming of demand in California.
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