First Solar (NASDAQ:FSLR) is upgraded to Overweight from Sector Weight with a $145 price target at KeyBanc, the latest sell-side firm to see the company as "the most direct immediate beneficiary" of the new climate legislation poised to become law with the introduction of the manufacturing tax credit for domestically produced solar panels.
The stock is little changed Thursday, taking a breather after skyrocketing 80% since a mid-July low.
Even with the stock's big gains, analyst Sophie Karp sees room for further upside, particularly given First Solar's (FSLR) "progress towards capacity additions and efforts towards reducing sensitivity to input costs."
Even with just the existing and announced capacity, Karp thinks First Solar (FSLR) could be eligible for as much as $400M in tax credits and should achieve at least a 20% gross margin by 2025 on $3B-plus in sales.
Karp also maintained Enphase Energy (ENPH) with an Overweight rating and raised her price target to $363 from $230, saying the new law will incentivize the broader adoption of distributed generation.
The analyst said the Inflation Reduction Act "will become the most durable policy framework aimed to incentivize renewable energy adoption in decades," and the enthusiasm in the solar energy space over the bill is justified and will continue.
Earlier this week, analysts at J.P. Morgan and Guggenheim upgraded the stock to Buy-equivalent ratings.