You Can Bet Your Bottom Tax Dollar The Sun Will Come Out Tomorrow

Insider activity picked up last week. Hopefully, it’s a sign that C-Suite executives believe the economy will rebound in the next 6-12 months. Despite the increased number of buys, we only found one that met our 3CP criteria.

A pair of First Solar, Inc. (FSLR) insiders bought stock on August 5, 2022. Chief Quality and Regulations Officer Patrick James Buehler acquired 489 shares for $49,927 investment. But, it is Chief Commercial Officer Georges Antoun’s nearly $1 million buy we’ll focus on. (1)

Antoun’s trade triggered two of our three Cs.

  • Change of Heart
  • Commitment

Prior to his purchase last week, Antoun’s previous FSLR trading history was one-way only, sell, sell, sell, selling 35 times in a row, collecting $27,615,284. When an insider’s transactions tilt heavily towards selling and then suddenly buys, we call that a change of heart which is one of the Cs.

Commitment is the other C for the Chief Commercial Officer. For us, we measure this C by the dollar amount. Antoun bought 9,946 First Solar shares at $100.53 for a total of $999,871. We’ll round up $129 and call it a million. (2)

First Solar is located in Tempe, Arizona and provides photovoltaic (PV) solar energy solutions. The company designs, manufactures, and sells cadmium telluride solar modules that convert sunlight into electricity. It serves developers and operators of systems, utilities, independent power producers, commercial and industrial companies, and other system owners.

Sometimes we need to connect the dots to make an educated guess in why insiders are buying. In this case, we feel the reason is fairly straightforward. The Inflation Reduction Act provides $369 billion towards Clean Energy. US solar manufacturers could be one of the biggest beneficiaries.

According to Eric Wesoff of Canary Media, “the bill would give domestic manufacturers generous incentives to build renewable energy hardware in the U.S., with the intent of reclaiming manufacturing dominance from China.”

“Particularly important are the tax credits for domestic production of solar cells, modules and components. Manufacturers would be eligible for a generous credit of 11 to 18 cents per watt for a solar module manufactured in a U.S.-based vertically integrated plant. Subsidies would apply across the solar value chain of polysilicon feedstock, thin-film or crystalline PV cells, wafers and modules, and would cover about half the cost of a solar module — a significant subsidy that would make U.S. manufacturing much more competitive.” (3)

The Inflation Reduction Act will need to light a fire for First Solar as Wall Street’s one-year price target is $99.47 (4) and the stock trades at $101.90 as of this keystroke. The company is forecasted to earn $2.09 in 2023 following a projected loss of $0.09 this year. Sales are expected to climb more than 25% to $3.25 billion next year from $2.59 billion this year. (5)

First Solar’s peer group trades at a lofty 57.9 times earnings (P/E) and 3.26 times sales (P/S). If FSLR hits its 2023 consensus earnings estimate and trades at the average peer P/E, shares would hit $121.01. Using the peer P/S ratio and FSLR’s 2023 revenue forecast equals a price of $99.40, which is just $0.07 lower than Wall Street’s one-year price target mentioned above.

Overall: First Solar, Inc. (FSLR) has above-average volatility and limited upside based on current market conditions. However, it appears that insiders, Patrick James Buehler and Georges Antoun, are banking on the Inflation Reduction Act providing a major boost to FSLR’s prospects.

Politics being politics, it’s not a done deal until the House and Senate pass and the President signs. Even then, the intended outcomes don’t always come to pass. While it is encouraging that Antoun had a change of heart and committed close to $1 million, First Solar is only for aggressive investors with a time horizon of at least two years, maybe longer.


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