First Solar (FSLR): A Hidden Gem in the Solar Sector?

The global shift toward renewable energy has positioned solar power at the forefront of decarbonization efforts, yet few companies in the sector trade at valuations as compelling as First Solar, Inc. (FSLR). Hedge funds and institutional investors are taking notice: despite short-term headwinds, FSLR’s fundamentals suggest it’s one of the most undervalued energy stocks today. Let’s unpack the data.

Valuation Metrics: A Bargain at 7.17x EV/EBITDA

First Solar’s valuation metrics paint a stark picture of undervaluation compared to peers. As of May 2025, its EV/EBITDA ratio stands at 7.17, far below the 15.18 median for the Semiconductors sector—a group that includes solar tech competitors. This metric, which factors in debt and cash reserves, highlights operational efficiency: FSLR generates $13.38 billion in enterprise value for every $1.87 billion in EBITDA, outperforming 76.67% of its industry peers.

The P/E ratio of 10.78 further underscores affordability. With a trailing twelve-month EPS of $11.76, FSLR’s stock trades at just over ten times earnings—a discount to its historical median P/E of 12.23. Meanwhile, its Price-to-Book (P/B) ratio of 1.66 approaches a two-year low, suggesting the market may be underestimating the value of its manufacturing assets and R&D investments.

Institutional Sentiment: A Mosaic of Caution and Confidence

Institutional ownership remains robust at 92.08%, but activity is mixed. Major funds like FMR LLC (Fidelity) and JPMorgan Chase reduced stakes by 55.9% and 85.7%, respectively, in Q4 2024—a reaction to near-term risks like tariffs and supply chain costs. However, others saw opportunity: Samlyn Capital and Demars Financial Group increased holdings by 78.5% and 17,404%, signaling confidence in FSLR’s long-term prospects.

By Q1 2025, total institutional holdings rose 7.84%, with funds like BNP Paribas boosting positions by 11.1%. Even as Jefferies downgraded FSLR to “Hold” in April .25 due to tariff concerns, the stock’s $126.76 price reflects a 21.08% increase in average portfolio allocation by investors.

Financial Performance: Navigating Near-Term Challenges

First Solar’s Q1 2025 results were softer than expected, with net income dipping to $1.95 per share versus $3.65 in Q4 2024. However, the 66.3 GW sales backlog—a record for the company—hints at strong future demand. Management also emphasized strategic advantages:
- U.S. market dominance: As the largest domestic solar manufacturer, FSLR benefits from Section 45X tax credits, now projected to deliver $1.7 billion in savings by 2025.
- Cost leadership: Its cadmium telluride (CdTe) panels boast lower production costs than rival silicon-based modules, a key edge in a price-sensitive market.

Despite lowering 2025 guidance (net sales: $4.5–5.5 billion; EPS: $12.50–17.50), FSLR’s 18.4% annualized book value growth and $1.96–2.47 billion in tax credits position it to weather near-term headwinds.

Conclusion: A Buy for the Long Game

First Solar’s valuation metrics—EV/EBITDA of 7.17, P/E of 10.78, and a P/B near its two-year low—suggest the market has yet to fully price in its structural advantages. While institutional sentiment is divided, the data favors long-term investors:
- Sector outperformance: FSLR’s valuation ranks better than 76.67% of 733 peers, and its EV/EBITDA is half the industry median.
- Backlog and tax tailwinds: The 66.3 GW backlog and $1.7 billion in tax credits ensure liquidity and margins, even amid tariff pressures.
- Sustainability of growth: With solar demand projected to triple by 2030, FSLR’s U.S. manufacturing footprint and cost leadership will likely amplify its earnings over time.

While near-term volatility remains, FSLR’s fundamentals make it a compelling buy at current levels for investors focused on the energy transition’s long-term winners.

Final Verdict: Hold for the next five years, and watch as undervaluation meets execution.