Comprehensive evaluation of First Solar, Inc. (NASDAQ: FSLR) (FSLR) | Research Report

🧩 1. Understandable Business – (Buffett, Lynch, Graham)

First Solar designs, manufactures, and sells advanced thin-film photovoltaic (PV) modules using cadmium telluride (CdTe) technology. These are deployed primarily in large-scale utility projects. Its differentiation lies in avoiding traditional crystalline silicon, instead focusing on U.S.-centric operations and a vertically integrated supply chain.

Business model is straightforward: produce solar modules, sell to utility developers.
Products are essential infrastructure, not discretionary.
Clearly within a layperson’s circle of competence, with a predictable and policy-backed revenue stream.

✅ PASS

🛡️ 2. Durable Competitive Advantage – (Buffett, Munger, Lynch)

Moat Sources:

Technology Leadership: Proprietary CdTe thin-film modules offer better performance in high temperatures and low-light conditions.
Domestic Manufacturing Scale: First Solar has one of the largest fully vertically integrated solar manufacturing operations in the U.S.
Policy Moat: Domestic content incentives and tariffs favor its U.S.-based facilities over foreign competitors.
Contractual Pricing Power: Long-term contracts (66.3 GW backlog) include protective clauses against tariff shocks.

Q1 2025 Moat Indicators:

ROE remains above 15%.
Gross margin at 41%, supported by U.S. production and tax credits.
Free cash flow positive; net cash position of $0.4B.
Significant backlog with over 32 GW tied to performance-based price adjusters.

✅ PASS

🧾 3. Quantitative Value & Financial Health – (Greenblatt, Graham, Klarman)

ROCE is strong, supported by high capital efficiency.
EV/EBIT is relatively attractive amid long-term contracts and protected pricing.
Debt-to-equity ratio remains low, maintaining a resilient balance sheet.
Interest coverage and liquidity positions are strong; cash equivalents over $0.9B.
Warranty risks from early Series 7 issues are contained within existing reserves.

Despite short-term working capital pressure due to high inventory and receivables, long-term solvency and capital efficiency remain solid.

✅ PASS

📊 4. Growth & GARP – (Lynch, Buffett)

Earnings: Q1 EPS of $1.95, below guidance, but full-year EPS revised to a healthy $12.50–$17.50.
Guided 2025 module sales: 15.5–19.3 GW.
PEG Ratio: Estimated under 1.5.
Reinvestment: Capex of $1B–$1.5B planned in 2025, focused on expanding Louisiana and Alabama facilities.
Technology development: CuRe modules with enhanced bifaciality and degradation profiles are commercially progressing.

✅ PASS

🌍 5. Macro & Cyclical Positioning – (Dalio, Marks)

Macroeconomic resilience: Positioned as a reliable U.S. supplier amid rising electricity demand and data center expansion.
Policy-driven volatility: Impacted by new tariffs—10% universal tariff and potentially higher reciprocal tariffs—affecting international facilities in Malaysia, Vietnam, and India.
Energy demand tailwind: Domestic electricity demand is expected to rise 50% by 2050; solar is one of the fastest-growing contributors.
Supply chain challenges: Short-term headwinds from AD/CVD duties and Section 301 tariffs.

✅ PASS

📉 6. Risk Aversion & Margin of Safety – (Klarman, Graham, Marks)

Margin of Safety: Valuation implies 15–25% upside based on updated intrinsic value models ($180–$200 range).
Downside Protection: Most contracts include protective clauses for tariff-related events. ~12 GW of potentially at-risk contracts are manageable due to these flexibilities.
Operational Risks: Managed via diversification and shift to Indian domestic market.
Inventory and AR: Elevated levels but expected to normalize by Q4 as shipments catch up.

✅ PASS

🧠 7. Management Quality & Capital Allocation – (Buffett, Munger, Lynch)

CEO & CFO Transparency: Comprehensive communication on risks and mitigation strategies.
Capital Allocation: Strategic investments in long-term capacity rather than aggressive short-term share buybacks.
R&D Spend: Strong focus on next-gen module efficiency and durability (CuRe technology).
Crisis Handling: Addressed Series 7 quality issues with third-party audits and customer resolutions.

✅ PASS

⚖️ 8. Final Valuation & Investment Decision

EPS Guidance: Revised range of $12.50 to $17.50 for 2025.
P/E Multiple: Trading near 11–13x forward earnings.
DCF & Relative Valuation: Suggest fair value around $180–$200 per share, vs. current price near $156.
Backlog Value: $19.8B, with scope to grow via utility demand and domestic incentives.

✅ PASS

📌 Summary: Investing Legends Scorecard

Pillar	Legend(s)	Key Criteria	Pass/Fail
Understandable Business	Buffett, Lynch, Graham	Simple, explainable, predictable	✅ Pass
Competitive Advantage (Moat)	Buffett, Munger, Lynch	Moats, high ROE, brand/scale edge	✅ Pass
Quantitative Value	Greenblatt, Graham, Klarman	ROCE, EV/EBIT, P/B, margin of safety	✅ Pass
Growth at Reasonable Price	Lynch, Buffett	PEG < 1.5, earnings momentum, reinvestment opportunities	✅ Pass
Macro & Cyclical Awareness	Dalio, Marks	Debt cycles, recession-resilience, risk parity	✅ Pass
Risk & Downside Protection	Klarman, Graham, Marks	Deep value, low downside, margin of safety	✅ Pass
Quality of Management	Buffett, Munger, Lynch	Capital discipline, transparency, track record	✅ Pass
Valuation & Final Judgement	All	Intrinsic value vs. price, 5–10 year return profile	✅ Pass

🏁 Final Summary

First Solar represents a high-quality, strategically essential U.S. industrial player in clean energy, offering a compelling long-term investment thesis. While short-term headwinds from trade policy and tariffs are real, the company is exceptionally positioned with strong technology, a defensible moat, flexible contracts, and visionary management. With a substantial domestic footprint, favorable government incentives, and resilient financials, it is not only well-aligned with investor legends’ principles—but also a potential asymmetric bet on America’s clean energy future.