First Solar Price Targets Cut After Q3 Sales Miss, Guidance Trim

A profit beat that analysts didn't reward

First Solar's third quarter is a case where both readings hold. The company earned more per share than expected and its margins reached a new high. Even so, Wall Street lowered its price targets the next morning. The cuts did not reflect doubt about the quarter's profitability. They reflected growing doubt about how quickly the company can turn a new US tariff regime into new contracts and revenue.

The Tempe-based thin-film maker reported diluted earnings of $5.30 per share for the quarter. That was up from $4.24 a year earlier and comfortably above the roughly $4.67 consensus that FactSet-based coverage cited.14 Benzinga measured the result against a lower $4.60 estimate, which makes the beat look a little bigger, but every outlet agreed the bottom line came in ahead of expectations.1 Net income rose about 25% from a year earlier to $571 million. Adjusted EBITDA reached $744 million, near the top of the company's own preview range, for an adjusted EBITDA margin of roughly 60%.12

Revenue told a different story. Net sales were $1.23 billion, down about 23% from $1.59 billion a year earlier, and below estimates that outlets put at between $1.28 billion and $1.29 billion.1614 Management blamed the drop on lower module volumes sold to third parties.13

Margins doing the heavy lifting

The main reason profit rose while sales fell was gross margin. It reached about 58%, roughly 20 percentage points higher than a year earlier. The company credited a larger share of US-made modules, along with lower freight, underutilization costs, tariffs and duties. Lower termination-related revenue partly offset those gains.14 Operating expenses were about $167 million, including roughly $67 million for research and development.12

The mix shift is the core of the bull case. Domestic production lets First Solar capture the economics of US manufacturing, and the quarter shows how profitable those modules can be. But earning more on fewer units only works for so long. Investing.com's recap put it simply: profitability improved because of lower volume, not stronger demand.14 Production rose 20.4% from a year earlier to 4.28 gigawatts, while shipments fell 22% in capacity terms to 4.1 gigawatts.3 When output rises and shipments fall, the gap between factory capacity and customer orders is worth watching.

The guidance cut that set the tone

Analysts focused less on the quarter than on the outlook. First Solar cut its 2026 net sales guidance to $4.6 billion–$4.9 billion, from the $4.9 billion–$5.2 billion range it gave after the second quarter.1 It also lowered its full-year volume forecast to 16.0–17.0 gigawatts.19 It reduced its adjusted EBITDA outlook by about $50 million, citing lower volumes in India, in its international Series 6 business and at its US finishing operations.1017 Needham calculated that the midpoint of fourth-quarter adjusted EBITDA guidance, $643 million–$843 million, was about 9% below the FactSet consensus of $813 million.7 MarketBeat noted that the midpoint of the full-year revenue guide was about 5.7% below what analysts had expected.8

Not all of the guidance worsened. Net cash guidance stayed the same because lower forecast capital spending offset the smaller cash inflows from reduced volumes.17 The company finished the quarter with about $1.5 billion in net cash, at the low end of its long-term target range of $1.5 billion–$2 billion.12 That was down from $2.4 billion at the end of 2025, which GuruFocus attributed to working-capital needs and capital spending.16 Even so, the board approved a buyback of up to $500 million, effective immediately and with no expiration date.12

Analysts lowered targets across the board

Almost every firm that published after the report lowered its target, and the size of the cuts varied widely. Needham kept its Buy rating but cut its target from $303 to $236. Bernstein lowered its target from $197 to $169 and kept an Underperform rating. Evercore ISI cut its target from $218 to $189 with an In-Line rating.1 Wells Fargo cut its target from $313 to $260 while staying Overweight.4 Freedom Broker went from $280 to $248, keeping a Buy rating.3 Susquehanna lowered its target to $246.10 BMO made one of the smallest cuts, from $263 to $255, and kept its Outperform rating.5

GLJ Research went further and downgraded the stock to Hold from Buy with a $161 target.10 Jefferies kept a Hold rating with a $199 target and welcomed the buyback.3 Goldman Sachs reiterated its Buy rating and $272 target, which made it one of the few to hold its view.5

Needham's method shows how much depends on future earnings. Its new $236 target is 10 times its fiscal 2027 EPS estimate of $23.63.7 That valuation is not demanding, so the cut largely reflects a lower earnings path. BMO cut its 2027 sales and EBITDA estimates by about 9%.5

Even after the cuts, MarketBeat's consensus target is about $257. Its tally shows 25 Buy or Strong Buy ratings, ten Holds and two Sells.4 With the shares near $170, most of Wall Street still sees substantial upside. The bulls lowered their targets but did not change their ratings.

The real debate: Section 232 pricing

The underlying question in all of this coverage is pricing after the Section 232 tariff proclamation. CEO Mark Widmar described the measure as a structural change in US solar manufacturing policy. He argued that First Solar, as the only fully integrated utility-scale manufacturer without a dependence on the Chinese crystalline silicon supply chain, is well placed to benefit.1

The bookings so far do not yet show that benefit. Since the previous call, the company booked about 1.4 gigawatts of US volume at roughly $0.36 per watt. Management acknowledged that almost all of it was contracted or in late-stage negotiation before the Section 232 announcement.14 GLJ was the most direct about this. It said First Solar has raised prices on every new inquiry since the proclamation but has not yet signed a deal at the new price. It also pointed to slipping bookings, shorter contracts and a thin order book for 2029–30, the years with the most unsold supply.10 Needham reported that developers prefer project-specific contracts and are putting off purchases for 2029 and later.7

Management frames this as deliberate discipline. It says it is holding out for better terms and has achieved better pricing than the average in its backlog, even though volumes have slowed.13 GLJ calls it patience presented as strategy.10 BMO takes a middle position that seems the most useful. It argues the debate has moved from whether higher pricing will turn into contracted revenue and earnings to when it will. It also notes the stock implies a long-term average selling price of only about $0.295 per watt, compared with recent bookings near $0.36.5

The backlog is large but shrinking. It stood at 44 gigawatts at quarter-end, about $13.5 billion in contracted value with deliveries through 2030, down from 45.1 gigawatts at the end of the second quarter.123

Other factors

The company now expects a binary decision on its Malaysia plant in the first half of 2027: run it fully or shut it down. Management says neither outcome should materially affect run-rate earnings.914 Phase one of the new South Carolina finishing facility has started production, and some start-up costs have moved to mid-2027.317 Perovskite spending for 2026 is now expected to reach about $120 million, up from an original estimate of about $100 million.12

How the stock reacted

The share price fell, but not sharply. The stock lost about 2.2% after hours and was down 4.7% at $168.50 in premarket trading.141 Midday Friday quotes ranged from about $170.59 to $171.45.49 The stock is close to its 52-week low of $165.86, far below its high of $320.95, and down about 32% year to date.43

We think the analysts are right to treat this as a quarter that was good on profit but weak on timing. The earnings beat is real, and a roughly 58% gross margin shows the economics of US production are working. But the guidance cut, the shrinking backlog and the lack of any bookings at post-tariff prices make it hard to project a growth path. The coming quarters need to show contracts signed at the higher prices management is asking for. Until then, the stock's price-to-earnings ratio of about 10.5 implies the market doubts those prices will hold.4