Issue #28

Betting on policy: These two solar giants are using U.S. manufacturing tax credits to carve out an unassailable lead in the global energy transition.

The solar energy race is heating up — and two industry leaders are shining brighter than ever. As global demand for clean power accelerates and governments double down on renewable incentives, investors are turning to solar stocks that combine innovation, profitability, and long-term visibility.

👉 One company is powering the grid with next-generation trackers that follow the sun across continents.
👉 The other is dominating U.S. manufacturing with policy-driven profits and a record-breaking backlog.
👉 Both are cashing in on the Inflation Reduction Act’s (IRA) solar boom — and both could define the next phase of renewable investing.

In this edition, we spotlight two solar giants — Nextracker (NXT) and First Solar (FSLR) — whose technology and policy tailwinds are positioning them as the top contenders in the global energy transition. ⚡

Nextracker (NASDAQ: NXT)

Nextracker (NASDAQ: NXT) is a leading global provider of intelligent, integrated solar tracker and software solutions for utility-scale and distributed-generation solar projects. The company is a crucial enabler in the accelerating global energy transition, providing technology that helps solar panels follow the sun's path to optimize energy production.

Business Model and Revenue Streams 📦

Nextracker's business model is a business-to-business (B2B) one, focused on delivering comprehensive solar tracking solutions to utility-scale solar plant developers, independent power producers (IPPs), and Engineering, Procurement, and Construction (EPC) firms worldwide. The company's competitive edge lies in its integrated approach, which combines hardware, intelligent software, and services.

Nextracker's revenue streams are primarily driven by three core segments:

• Solar Tracker Hardware Sales: The primary revenue source comes from the sale of its advanced solar tracker systems, such as the NX Horizon and NX Horizon-XTR, which are designed to enhance the energy yield of large-scale solar projects. This segment benefits directly from the accelerating deployment of utility-scale solar globally.
• Software Subscriptions: Recurring revenue is generated from its intelligent software solutions, most notably TrueCapture™, which uses machine learning to dynamically adjust tracker angles for maximum energy production, and NX Navigator, a monitoring and control platform.
• Services and Other Revenue: This includes income from project design, engineering support, installation assistance, and operation and maintenance (O&M) services, providing a stable, high-margin ancillary stream.

Macroeconomic and Policy Impact 🌎

Nextracker is significantly impacted by macroeconomic factors and government policy, particularly in its largest market, the U.S.:

• U.S. Policy Tailwinds: The company is a major beneficiary of the U.S. Inflation Reduction Act (IRA), particularly the 45X Advanced Manufacturing Production Tax Credit. By expanding its U.S. domestic manufacturing footprint and supply chain, Nextracker enables its customers to qualify for significant tax credits, which strengthens its pricing power and market share in the domestic market.
• Geopolitical and Trade Dynamics: Despite its localized manufacturing strategy, global operations expose it to geopolitical risks and trade tensions. Fluctuations in the cost of raw materials (like steel and aluminum) and potential tariffs can pressure margins, though its diversified global supply chain and localization efforts are designed to mitigate these risks.
• Interest Rates: Utility-scale solar projects are highly capital-intensive and often financed by debt. Elevated interest rates can increase project costs, potentially slowing down new project final investment decisions (FIDs), which could impact Nextracker's booking and backlog conversion timelines.

Recent Performance and Corporate Developments 📈

Nextracker has demonstrated robust financial performance in recent quarters, consistently beating analyst expectations and showing strong growth driven by high global demand and successful operational execution.

Q2 Fiscal Year 2026 Financial Highlights (as of October 23, 2025): 💰

• Solar Tracking Leader: Global market leader in intelligent solar tracking hardware and software for utility-scale projects (NX Horizon trackers and TrueCapture™ software).
• Rapid Growth & Profitability: Delivered Q2 FY26 revenue of $905.3M (up 42.4% YoY) and $1.19 Adjusted EPS. Holds a massive $5.1+ billion backlog, ensuring high revenue visibility.
• IRA Policy Catalyst: Strongest beneficiary of the U.S. Inflation Reduction Act (IRA) through its domestic manufacturing, providing a structural cost advantage and market share gain.
• Strategic Expansion: Actively expanding product integration (e.g., acquisitions and new eBOS products) and increasing international exposure through strategic ventures like Nextracker Arabia.

Strategic Initiatives and Acquisitions: 🤝

Nextracker has been highly active in corporate development, focusing on expanding its product platform and global reach:

• Joint Venture in Saudi Arabia: In October 2025, Nextracker formed Nextracker Arabia with Abunayyan Holding, a strategic joint venture to localize manufacturing and accelerate solar adoption across the Middle East and North Africa (MENA) region.
• Acquisitions: The company completed two notable acquisitions:
• Origami Solar (September 2025): Acquired for approximately $53 million to expand into advanced roll-formed steel solar panel frames, broadening its product offerings and reducing reliance on aluminum.
• Ojjo (June 2024): Acquired to enhance its foundations business for challenging soil conditions, expanding its addressable market for utility-scale projects.
• Product Innovation: Recently debuted NX Earth Truss foundation solution in Australia and launched NX PowerMerge, a transformative electrical balance of system (eBOS) trunk connector, further integrating hardware and software to increase the content value per solar project.

Path to Profitability and Fair Value 🎯

Nextracker is already highly profitable and demonstrates superior financial health with high margins and a strong balance sheet. Its path to sustained and growing profitability centers on:

1. Platform Integration: Increasing the adoption of its high-margin ancillary products (software like TrueCapture and eBOS solutions like NX PowerMerge) to increase its "wallet share" per customer and overall project value.
2. IRA-Fueled Localization: Leveraging its domestic manufacturing expansion to maximize the benefits from the IRA, which provides a structural cost and pricing advantage in the massive U.S. market.
3. Geographic Diversification: Expanding its international footprint through JVs (like Nextracker Arabia) and new product launches to tap into emerging high-growth markets and de-risk concentration in the U.S.

Fair Value Assessment: 🤔

Valuation analysis for NXT presents a mixed view:

• P/E Ratio: At a Forward P/E of approximately 22x (as of late 2025), Nextracker is trading below the average for its industry peers, which suggests a degree of relative undervaluation compared to the sector.
• Analyst Narratives: Some analyst models based on aggressive growth forecasts suggest the stock is fully valued or slightly overvalued relative to its current price, while others that focus on its market-leading profitability (high returns on assets and equity) see it as fairly priced for its growth profile.
• Overall: Given the company's clear market leadership, robust financials, and strong policy tailwinds, many investors view the current price as a fair entry point for a growth-at-a-reasonable-price (GARP) stock in the solar infrastructure space.

Analyst Estimates and Ratings 📊

Nextracker enjoys strong support from the analyst community, with a high concentration of positive ratings.

• Consensus Rating: The overall consensus rating is a "Strong Buy" or "Buy". The company has received a high number of "Buy" or equivalent ratings, often reiterated after its recent, strong earnings reports and strategic announcements.
• Price Target: The average 12-month price target is approximately $90.65. While this is close to or slightly below the current elevated trading price, analyst price targets range widely, with the high-end targets reaching up to $125, reflecting optimism about its growth and expanding total addressable market (TAM).

Investor-Focused Takeaway: Is NXT Right for Your Portfolio?

Nextracker offers a compelling investment thesis as a technology platform leader in the solar infrastructure sector. Its high profitability, strong operating cash flow, and multi-billion-dollar backlog provide a powerful combination of financial stability and high revenue visibility.

What to Watch in the Near Term:

• Backlog Conversion: Monitor the pace at which the >$5 billion backlog is converted into actual revenue, as this is key to justifying the stock's valuation.
• International Execution: Track the success and financial contribution of its new international ventures, particularly Nextracker Arabia, as global growth is a major future catalyst.
• Supply Chain Costs: Keep an eye on global steel and aluminum pricing trends, as input costs could still impact gross margins despite localization efforts.

Recommendation:

Nextracker (NXT) is a highly recommended solar stock for a 2026 portfolio. Its structural competitive advantages—driven by best-in-class technology, IRA benefits, and a focus on high-margin product integration—make it well-positioned to capitalize on the sustained, multi-decade transition to utility-scale solar energy globally.

First Solar (NASDAQ: FSLR)

First Solar (NASDAQ: FSLR) is the Western Hemisphere's largest manufacturer of thin-film solar modules, leveraging its proprietary Cadmium Telluride (CdTe) technology. Unlike most global competitors who rely on traditional crystalline silicon, First Solar offers a unique, vertically integrated manufacturing process, primarily serving the utility-scale solar market with a focus on high performance in hot and humid climates.

Business Model and Revenue Streams

First Solar's business model is centered on a vertically integrated manufacturing platform of advanced, specialized solar modules, complemented by strategic project development services. This model offers superior quality control and a distinct technological advantage over conventional silicon-based module producers.

The company generates income from two main areas:

• Solar Module Sales: The overwhelming majority of revenue comes from the sale of its Series 6 and Series 7 thin-film PV modules to utility-scale solar project developers, independent power producers (IPPs), and EPC firms. The value proposition here is lower manufacturing costs, superior performance characteristics (like lower degradation and better shading response), and a low-carbon footprint.
• Systems and Service Revenue: This includes project development, engineering, procurement, and construction (EPC) services, as well as recurring revenue from Operations and Maintenance (O&M) contracts for large-scale solar power plants.

Macroeconomic and Policy Impact 🌎

Policy is the single most significant driver of First Solar's current performance and future outlook:

• U.S. Policy Windfall (IRA & FEOC): The company is the prime beneficiary of the U.S. Inflation Reduction Act (IRA), specifically the 45X Advanced Manufacturing Production Tax Credit, which provides a massive, high-margin subsidy for domestically produced modules. Furthermore, Foreign Entity of Concern (FEOC) restrictions on Chinese manufacturers limit competition, enabling First Solar to command a price premium and secure large, long-term contracts.
• Global Trade and Tariffs: The imposition of tariffs on imported solar modules (particularly from Southeast Asia) has been a mixed bag, disrupting the market but ultimately strengthening the demand for First Solar's domestically produced, tariff-exempt modules.
• Interest Rates: As with all large infrastructure projects, elevated interest rates can pressure the economics of utility-scale solar projects, potentially leading to project delays or cancellations, which could impact the conversion rate of First Solar's enormous contract backlog.

Recent Performance and Corporate Developments 📈

First Solar has maintained a trajectory of aggressive capacity expansion and strong financial results, although recent guidance revisions reflect some short-term operational headwinds.

Q3 Fiscal Year 2025 Financial Highlights (as of September 30, 2025)

• Explosive Revenue Growth: Net Sales hit $1.6 billion (up 79.7% YoY), driven by a record 5.3 GW of thin-film module shipments.
• Strong Profitability: Reported Net Income per Diluted Share of $4.24, benefiting significantly from the IRA's Section 45X manufacturing tax credits.
• Massive Backlog: Secured a robust contracted sales backlog of 53.7 GW, valued at $16.4 billion, ensuring multi-year revenue stability.
• Guidance Adjustment: 2025 EPS Guidance was slightly lowered (midpoint $14.50) due to management adjusting for minor short-term operational and contract challenges.

💰Strategic Initiatives and Corporate News: 🤝

First Solar's strategy is solely focused on global capacity expansion, particularly in the U.S., to capitalize on policy advantages:

• U.S. Manufacturing Expansion: The company is aggressively building out new manufacturing facilities in the U.S. (e.g., Louisiana and Alabama) to increase its total U.S. capacity to approximately 14 GW by 2026. This expansion directly feeds its IRA advantage.
• Product Advancement: Focus remains on scaling its next-generation Series 7 module, which promises higher efficiency and lower manufacturing costs, securing its technological leadership.
• No Major Mergers/Acquisitions: The company has focused on internal growth and technology development rather than significant M&A activity.

Path to Profitability and Fair Value 🎯

First Solar has achieved strong profitability, a status it expects to sustain and significantly grow based on its unique policy position. The path to long-term profitability is built on three pillars:

1. Section 45X Credit Realization: Maximizing the production volume from its U.S. plants to capture the high-margin, guaranteed revenue stream provided by the IRA's manufacturing tax credit.
2. Technological Cost Leadership: Scaling the production of its advanced Series 7 modules to drive down the cost per watt and widen its gross margin versus competitors.
3. High-Value Backlog Conversion: Converting its massive, high-priced contract backlog into revenue, which locks in profits for the next several years.

Fair Value Assessment: 🤔

Valuation metrics suggest First Solar may offer a compelling long-term value proposition, despite its recent share price appreciation:

• P/E Ratio: Trading at a forward P/E of around 20-22x, FSLR appears attractive when compared to the broader U.S. semiconductor and high-growth technology sectors (which often trade above 35x).
• Discounted Cash Flow (DCF): Some DCF models suggest the stock is significantly undervalued when factoring in the multi-billion-dollar stream of IRA tax credits and its future free cash flow generation from its huge backlog.
• Overall: While the stock has seen volatility, its strong net cash position, technological differentiation, and unmatched policy tailwinds strongly suggest it is fairly priced to undervalued based on its multi-year earnings outlook.

Analyst Estimates and Ratings 📊

First Solar commands strong analyst consensus, reflecting its structural competitive advantages.

• Consensus Rating: The consensus rating is a "Strong Buy" or "Buy", with analysts emphasizing the unmatched competitive moat provided by U.S. policy.
• Recent Ratings: In the last 30 days, multiple firms have reiterated or raised their price targets following the Q3 earnings, including a $330 price target from UBS, maintaining a "Buy" rating.
• Price Target: The average 12-month price target is approximately $265 - $270, with the high-end targets reaching $335, implying significant upside potential as capacity comes online and IRA benefits are realized.

Investor-Focused Takeaway: Is FSLR Right for Your Portfolio?

First Solar is a unique, high-quality investment in the renewable energy sector, positioned not just as a technology leader but as a direct beneficiary of U.S. government energy and industrial policy. Its near-term earnings are heavily supported by IRA tax credits, making it a defensive growth play.

What to Watch in the Near Term:

• IRA Clarity and Stability: Any changes or re-interpretations of the IRA's FEOC or 45X rules could instantly impact its profitability and valuation.
• Capacity Ramp-up: Monitor the commissioning and utilization rates of its new U.S. manufacturing facilities (e.g., Alabama and Louisiana), as successful ramp-up is key to realizing its massive earnings potential.
• Pricing Power: Watch its average selling prices (ASPs) to ensure it can maintain a premium over imported modules, leveraging the policy-driven demand for domestic supply.

Recommendation

First Solar (FSLR) is viewed as a core, long-term buy for investors seeking exposure to U.S.-based manufacturing and policy-driven growth in the utility-scale solar market. Its technological advantage and unmatched backlog provide a clear, visible path to significant earnings growth through 2026 and beyond.

Final Take: Two Solar Titans Lighting Up the Path to 2026

From U.S. deserts to the Middle East, Nextracker (NXT) and First Solar (FSLR) are proving that innovation, policy alignment, and supply chain dominance are the ultimate power sources in solar investing.

Whether you're seeking hardware-plus-software platform growth or vertical manufacturing leverage on U.S. tax credits, these stocks offer more than just clean energy exposure — they offer clarity, profitability, and multi-year revenue visibility in a volatile market.

🔧 Nextracker (NXT) – The High-Margin Solar Tracker Platform
✔ $5.1B+ backlog with growing software + eBOS revenue streams
✔ IRA manufacturing tailwinds plus global expansion (Saudi JV, Australia)
✔ Strong earnings growth, recurring revenue potential, and platform expansion
➤ Best for: Investors seeking a solar infrastructure growth story with international upside and strong cash generation.

☀️ First Solar (FSLR) – The Made-in-America Module Powerhouse
✔ 53.7 GW contracted backlog + $16B sales visibility
✔ Massive benefit from 45X tax credits and FEOC protection
✔ Net cash balance sheet and unmatched U.S. manufacturing scale
➤ Best for: Long-term investors looking for policy-driven, margin-protected earnings from a rare U.S. clean energy champion.

Investor Insight:

📈 Want software-enhanced solar exposure with a global footprint? → NXT
​ 🏭 Want policy-driven earnings visibility with unmatched U.S. scale? → FSLR

As 2026 approaches, these two solar stocks aren't just riding the energy transition—they're defining it.​
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Happy Trading
​— Team Premium Stock Alerts