Alex Gates of Clayton Partners presented his thesis on First Solar (US: FSLR) at Best Ideas 2026.
Thesis summary:
Decarbonization remains a primary theme for Alex despite political shifts, as the OBBB has largely settled the U.S. rules of the road. Electricity demand should grow six times faster over the next 20 years than historically, fueled by AI data centers and electrification. Utility-scale solar deploys two to three times faster than fossil fuels and stays cost-competitive without tax credits. First Solar, the leading domestic panel maker, uses patent-protected thin-film technology independent of Chinese supply chains, avoiding tariff and forced-labor risk.
First Solar has a sold-out order book through 2028, giving high cash flow visibility and a margin of safety. Alex emphasizes that its CadTel thin-film process runs under one roof with lower upfront cost and energy use, while polysilicon must stitch together silicon, wafer and panel supply chains. A factory can be built and scaled within 18 months, and U.S. production should exceed 21 GW in 2026. A slight efficiency gap versus polysilicon should narrow.
Near-term catalysts could lift pricing. A Supreme Court ruling on IEEPA tariffs is pending, and replacement Section 232 tariffs sought by trade groups could add up to 45 cents a watt, versus the 30 cents First Solar charges today. Lower rates help solar most, since about 90% of its cost is upfront. Google’s purchase of Intersect Power, an exclusive First Solar customer, shows hyperscalers locking in power, and EPS could more than double as U.S. module sales ramp through 2027.
The balance sheet carries no debt and over $1.6bn of net cash at the end of 2025, and Alex expects First Solar to generate two-thirds of its market cap in cash by 2030. Management prioritizes factory expansion and R&D-focused M&A, but the scale of free cash flow makes buybacks or dividends a likely 2026 focus and a rerating catalyst. The OBBB kept 45X manufacturing credits while shutting out foreign entities of concern, leaving First Solar the only scaled producer that easily qualifies.
The shares recently traded at 8x consensus 2027 EPS, while Shoals and Nextracker trade above 20x and Canadian Solar commands a 60% premium despite tariff exposure. Alex’s 2027 base case of 23 GW of module sales and 40% net margins yields $27 of EPS; 13x plus cash gives a $385 target, or 62% upside. A high case at 50% margins reaches about $670, 180% upside, and the low case about $170. The main risk is political, then factory execution.
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Best Ideas 2026 was held from January 6-23, 2026. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
