Alex Gates of Clayton Partners presented his in-depth investment thesis on First Solar (US: FSLR) at Best Ideas 2026.
Thesis summary:
Decarbonization remains a primary investment theme despite political shifts, as the domestic regulatory environment has stabilized through recent legislation like the OBBB. Electricity demand in the U.S. is projected to grow six times faster over the next 20 years than historical averages, fueled by AI data center expansion and the electrification of industry and transport. Utility-scale solar is positioned to meet this demand because it can be deployed two to three times faster than fossil fuel alternatives and remains cost-competitive even without tax credits. Within this tailwind, First Solar (FSLR) operates as the leading domestic manufacturer with a patent-protected thin-film technology that is entirely independent of Chinese supply chains, mitigating tariff and forced-labor risks.
First Solar maintains a sold-out order book through 2028, which provides high visibility into future cash flows and a margin of safety for investors. Alex emphasizes that the company’s CadTel technology offers a manufacturing advantage over traditional polysilicon by integrating production under one roof, reducing friction and energy use. Production capacity is expected to exceed 21 GW by 2026 as new U.S. facilities scale. Near-term catalysts include potential upward revisions to panel pricing driven by Section 232 tariffs and a Supreme Court ruling on IEEPA. Furthermore, hyperscalers like Google have begun securing large-scale projects from FSLR customers to lock in power for AI buildouts, reinforcing the company’s essential role in the energy transition.
The company’s balance sheet is characterized by zero debt and a cash position that ended 2025 at over $1.6 billion. Alex anticipates that FSLR could generate two-thirds of its market cap in cash by 2030. While management has historically prioritized internal expansion and R&D-focused M&A, the magnitude of expected FCF suggests that capital allocation toward buybacks or dividends could become a focus in 2026. This shift in capital return strategy, combined with a potential reduction in interest rates, would likely serve as a catalyst for a market rerating. Although the Trump administration has previously targeted renewables, the OBBB maintained critical 45X manufacturing tax credits while making it harder for foreign entities of concern to qualify, further strengthening FSLR’s competitive position.
Valuation appears depressed relative to the company’s earnings ramp and peer group. The shares recently traded at 8x consensus 2027 EPS, a discount compared to equipment providers like Shoals or Nextracker which trade above 20x. Alex estimates module sales of 23 GW and 40% margins in a 2027 base case, yielding $27 per share in earnings. Applying a 13x multiple and accounting for cash on the balance sheet, he suggests a price target of $385, representing 60% upside. In a high-case scenario involving 50% net income margins and improved pricing, the valuation could reach $670 per share, offering 180% upside from recent levels.
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About the instructor:
Alex Gates is a Partner, Co-Portfolio Manager of CPDS and Chief Compliance Officer at Clayton Partners LLC. Founded in 2003, Clayton Partners is an opportunistic value investment firm.
Clayton manages a private investment partnership and individual separate accounts. The firm takes a private equity approach to investing in the public markets and looks to align itself with shareholder friendly management teams that focus on long-term value creation.
Alex leads the firm’s effort to find compelling public and private investment opportunities in sustainable businesses that have a positive impact on climate change. The current focus is on investments in renewable energy, utilities, bio-fuels, and recycling.
Alex holds a Masters Degree in Business Economics from the University of California at Santa Barbara. Prior to his graduate education, he completed a dual major BS in Economics and Statistics from Cal Poly State University. At both institutions, Alex concentrated in finance and economic modeling. He earned the Chartered Financial Analyst designation in 2015.