I See Sunny Days Ahead for My Big-Cap Stock Pick of 2024
Let me explain why I'm betting on a bright future for First Solar -- the only major U.S. solar company that builds its products outside of China.
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My top big-cap pick for 2024 is First Solar Inc FSLR . Let me explain my choice here, as well as some potential advantages of large-cap investing.
Founded in 1999, First Solar is a major American solar technology company and is the largest in the Western Hemisphere. The company sells to utility-scale solar farms and is the only large U.S. solar name that manufactures its products outside of China.
Big cap stocks like First Solar typically don't have the potential upside that a good small-cap trade can offer, but they also don't carry as much risk. Another advantage of large names is they tend to have solid numbers and good profitability. The key for traders, however, is to identify names that will attract institutional Wall Street and help force expanded multiples. (I have already posted my top small-cap and exchange-traded fund picksfor 2024, and those can be found in the links provided here.)
Why First Solar?
Early in 2023, one group that looked like it might attract broad interest was solar energy. President Joe Biden's Inflation Reduction Act was largely a bill that supported "green" energy and offered huge tax benefits to solar manufacturers, but sentiment in the group turned negative, in part because of supply chain problems. Interest rates also dampened enthusiasm. Negative sentiment in electric vehicles and solar energy made the sectors laggards, while other big-cap technology names took off.
First Solar now has a large backlog of business and broke ground on a new plant in Louisiana in August. Since it uses all U.S.-made components, its products qualify for a 10% bonus tax credit on top of the initial 30% tax credit.
What is most compelling here is the growth. For the upcoming December-ending quarter, FSLR is expecting earnings per share of $3.27 vs. a loss of $0.07 in the same quarter in 2022. For the year of 2024, FSLR is expecting to see EPS of $13.08 vs. $7.74 in 2023, which is 69% growth. The company currently has a trailing price-to-earnings of 39, and the forward price-to-earnings is just 13. The company substantially beat estimates in the last two quarters.
A total of 21 analysts who follow the stock with an average price target of $228.22, which is 32% above the current price. The high estimate is $272 from Bank of America. Piper Sandler calls FSLR "the solar stock to own in 2024." Goldman Sachs believes FSLR will have the highest quality growth with compounding EPS visibility into 2026 and beyond.
The stock has enjoyed a good bounce in the rally during the last two months but remains a compelling value at the current price.
At the time of publication, DePorre was long FSLR.
