First Solar (NASDAQ:FSLR) surges to a new YTD high Monday, +9.2%, following the weekend passage in the U.S. Senate of the climate and energy bill, which Democrats called the largest investment in fighting climate change ever made by the U.S.
The stock also won two analyst upgrades: Guggenheim raised First Solar (FSLR) to Buy from Neutral with a $135 price target, and J.P. Morgan upgraded to Overweight from Neutral with a $126 price target, up from $83.
"Of all the names in our coverage, we believe First Solar appears positioned to benefit the most from the provisions of the Inflation Reduction Act that passed the Senate," Guggenheim's Joseph Osha wrote.
Despite First Solar's (FSLR) 70%-plus gain since July 15, Osha believes "investors have not fully digested how transformational the IRA could be for FSLR's business."
The most straightforward impact on the stock from the climate legislation will be the extension of the investment tax credit at 30% until 2024, and a domestic content adder could take the credit to 40%, while "the most interesting impact" comes in the form of domestic manufacturing tax credits, according to Osha.
Analysts at Needham point to First Solar (FSLR) and Sunrun (RUN) as the biggest beneficiaries in the near term, while Enphase Energy (ENPH) and SolarEdge (SEDG) also should benefit from higher government spending and more solar adoption.
Maxeon Solar Technologies (MAXN) also was initiated with an Outperform rating and $22 price target at Northland, which views the stock as "an attractive way to play the tailwinds" expected from the climate bill.
Green energy stocks trade mostly higher - although some have pulled back from opening highs - following the Senate passage of the climate bill: (FCEL) +8.4%, (CLNE) +7.4%, (STEM) +6.5%, (RUN) +6.3%, (TPIC) +5.7%, (BE) +5.3%, (ARRY) +4.6%, (PLUG) +3.9%, (BLDP) +3.5%, (CEG) +3.1%, (NOVA) +3%.
First Solar (FSLR) last week was upgraded at Bank of America to Neutral from a Sell-equivalent rating.