First Solar (NASDAQ:FSLR) +3.8% premarket as BofA Merrill Lynch upgrades shares to Buy from Neutral with a $63 price target, citing latest IRS tax guidance allowing as much as a four-year ITC extension on solar projects, which analyst Julien Dumoulin-Smith says was "the most bullish interpretation IRS could have released."
The IRS guidance is likely worth at least $50B to his prior cumulative capex expectations for the sector through 2023, Dumoulin-Smith says; although less confident of a module price recovery, he sees prospects for more U.S.-bound projects.
Credit Suisse said Friday that the IRS ruling is positive for solar developers with a strong pipeline, including FSLR and NextEra Energy (NYSE:NEE), while the impact on residential and distributed generators should be relatively smaller given shorter construction times but still positive for Sunrun (NASDAQ:RUN), SunPower (NASDAQ:SPWR) and Vivint Solar (NYSE:VSLR); the ruling is seen as negative for solar manufacturers such as Jinko Solar (NYSE:JKS), JA Solar (NASDAQ:JASO) and Canadian Solar (NASDAQ:CSIQ).
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