To The Moon

$First Solar(FSLR)$  

Mathematical Money | October 7, 2026

$FSLR$ set a fresh 52-week low on 1 October. The trigger was a Piper Sandler downgrade — they lowered their price target from $260 to $251.

Sit with that for a second. The stock made a new annual low because an analyst reduced his target to a level roughly 45% above where the shares were trading. That is what a market looks like when it has stopped listening to targets and started pricing a problem.

I bought into it on Monday. Here's the reasoning, including the part that argues against me.

The business is not the problem

Second quarter, reported at the end of July. Earnings per share of $3.92, up 23% year on year — on revenue that actually fell 4%. That combination only happens when margins are expanding.

And they are. Adjusted EBITDA margin came in around 61%, which is a number you'd expect from software rather than from a company that manufactures physical panels in factories. The balance sheet holds roughly $1.7 billion in net cash, and full-year guidance of $4.9–5.2 billion of revenue and $2.6–2.8 billion of EBITDA was reaffirmed rather than cut.

The technology is genuinely differentiated too. First Solar makes cadmium telluride thin-film panels rather than crystalline silicon, which commands a premium selling price and sits outside the polysilicon supply chain that most of the tariff pressure lands on.

So this isn't a broken company trading at a low. It's a highly profitable one.

The number that actually matters, and it's going the wrong way

Here's the part I'd put above everything else, and it's the thing I'd check before anyone else's price target.

The contracted backlog stands at 45.1 GW, worth about $13.6 billion, extending through 2030. Against a market capitalisation in the region of $22 billion, that's contracted future revenue equal to roughly 60% of the entire company's value. That's the bull case in one line.

But at the end of 2025 that backlog was 50.1 GW. It has gone backwards by about five gigawatts in six months.

That's not a detail. The whole investment case rests on multi-year contracted visibility, and the number expressing that visibility is shrinking. Anyone quoting the $13.6 billion without saying which direction it's moving is telling you half of it.

Why it's shrinking

Customers are delaying booking decisions while they wait for clarity on Section 232 tariff policy. Nobody wants to sign a multi-year module contract when the cost structure might change by legislation.

Meanwhile a new 15% US tariff on polysilicon derivatives is adding input cost pressure across the sector, high borrowing costs are slowing utility-scale project starts, and developers are sitting on unused panel stock they bought earlier.

You can see all of that in one line of the accounts. Inventory reached $1.27 billion at the end of June, up from $974 million at the end of December — a 31% build. Production is running ahead of what's being delivered, which is exactly the signature of demand arriving slower than planned.

There's a cost to the idle capacity too: underutilised overseas plants are running at something like $115–135 million of annual underutilisation expense. That's real money being burned waiting for policy.

The chart, honestly

First Solar closed Monday at $179.80. It trades below its 20-day, 50-day, 100-day and 200-day averages, with the 200-day sitting nearly 20% above the price. It's 43.5% below the June high of $318.25 and about 4.5% above a 52-week low that was set five days ago.

Sixty-day volatility runs near 51%, so a 20% move in a month is ordinary here rather than dramatic.

I bought a stock that made a fresh annual low last week and hasn't yet shown any evidence of stopping. I don't have a technical argument. I have a business argument and a price, and the chart disagrees with me.

How I structured it, and why the date matters

I bought January 2028 calls at the $135 strike, deep enough in the money that about two-thirds of what I paid is intrinsic value rather than time premium. The position moves roughly like the stock at about two and a half times the capital efficiency.

The expiry is the deliberate part. By January 2028 the South Carolina facility — 17.7 GW of new capacity — should have ramped, the Section 232 tariff question should be resolved one way or the other, and we'll have four more quarters of backlog data. A six-month option here would be a bet on sentiment turning. This is a bet on policy resolving and the backlog converting, and neither of those runs to a short schedule.

Against it I've written October $200 calls, about 11% above the current price and expiring in three weeks. That strike is the bottom of my own base-case range, which makes it the first level where I'd start thinking about the thesis rather than the trade. I'm renting out the move from here to there, for three weeks, while keeping everything above it and everything beyond October.

What would change my mind

Not the price, and not another analyst cut.

The backlog. It's at 45.1 GW having been 50.1 GW. If the next report shows it falling again, then the multi-year visibility that justifies owning this at all is eroding in real time, and the 61% margin on a shrinking order book is a much less interesting proposition.

The second thing is inventory. If $1.27 billion keeps climbing, demand isn't arriving, and no amount of balance-sheet strength fixes a product nobody is collecting.

Both numbers come out together at the next quarterly report, which makes that the single date worth putting in the calendar.

Two things I'd like other views on.

Does anyone else treat backlog direction as more important than backlog size? I've started reading the delta rather than the level on every company that reports one, and it has changed my mind about two positions this year.

And on the downgrade — when an analyst cuts a target to a level far above the market price and the stock falls anyway, what do you take from that? I read it as the market pricing something the model hasn't caught up with. The alternative reading is that the target is simply wrong and the price is right, which is uncomfortable but perfectly possible.

#solar #FSLR #options #LEAPS #energy

Stop guessing. Start calculating.

Live to fight another day. 🤙