This solar stock is poised for 50% upside as demand strengthens on data center surge, Goldman says

Published Thu, May 2 202410:18 AM EDTUpdated Thu, May 2 202411:21 AM EDT

First Solar is poised for growth as demand continues to improve with surging electricity consumption from data centers acting as a catalyst for the manufacturer, according to Goldman Sachs. The firm raised its stock price target to $268 after First Solar reported another stronger quarter, which suggests the shares could log 50% upside from Wednesday's close of $177.58. "As the demand picture continues to improve, management discussed the potential for adding incremental factories, which we view as a key catalyst," Goldman Sachs analyst Brian Lee told clients in a Thursday note. First Solar remains undervalued due to its status as the go-to company for U.S. customers seeking domestically produced modules, JPMorgan analyst Mark Strouse said in a research note Thursday. The stock has inched up less than 2% since the start of the year. Strouse also raised his price target, bumping it to $240, or 35% above Wednesday's close. On Thursday, shares were trading lower even after the company beat Wall Street's first-quarter estimates and reiterated its 2024 sales forecast of $4.4 billion to $4.6 billion. On Wednesday afternoon, First Solar said its net income surged to $236.6 million, a more than 400% increase over the $42.5 million reported in the year-ago period. First Solar CEO Mark Widmar told analysts during the company's earnings call that he is seeing a "meaningful increase in demand expectations driven in part by data center load growth." Apple , Google, Meta and Microsoft are committed to carbon-free energy as they hyperscale data centers, Widmar said. On Wednesday, Microsoft signed a deal to invest more than $10 billion on renewable energy capacity. However, it did not specify the suppliers or sources of that power. While First Solar did not disclose how much demand is coming from data centers, Chief Financial Officer Alexander Bradley said the company will be "the favored supplier to the projects that are going to be supplying power to these data centers for these kind of asset owners." Widmar indicated First Solar could add another factory to its capacity if the company sees enduring demand through the rest of the decade and the policy environment stabilizes after the November U.S. presidential election. "We'll be ready to go as quickly as possible," Widmar told analysts.