First Solar (FSLR +1.14%) has been on an absolute roller coaster. It has more than tripled over the past five years, but that includes multiple 20% and 40% drops along the way.
Elon Musk has his eyes set on solar-powered AI data centers for SpaceX. Furthermore, the Solar Energy Industries Association released a report last year detailing how the U.S.'s AI leaders are investing billions of dollars into solar energy.
Using solar energy as an AI data center power source can put less strain on the electric grid, and First Solar fits nicely into that objective. A 2% year-to-date drop in the stock price suggests that not every investor sees this opportunity quite yet.
Image source: Getty Images.
First-quarter results offered reasons for optimism, especially if First Solar continues to ride AI tailwinds. Net sales reached $1.04 billion, which was up by 24% year over year. The company cited an "increase in the volume of modules sold to third parties" as a major catalyst, which was fueled by AI demand.
First Solar also has a contracted 47.9-gigawatt backlog, providing multiple years of high-growth revenue visibility. For instance, the company expects to sell 17.6 gigawatts at the projected 2026 midpoint and earn $5.05 billion. Megawatt rates vary by project, but the company said its 47.9 gigawatts of capacity equate to $14.4 billion in contracted backlog through 2030.
Record sales in India contributed to the results. The company sold approximately 1 gigawatt worth of energy to the country in Q1. First Solar also mentioned "substantially committed" U.S. production through 2028.
First Solar currently has a 16.5 price-to-earnings (P/E) ratio and a 0.67 price/earnings-to-growth (PEG) ratio. Those valuations are shockingly low for a company that has achieved an annualized revenue growth rate of 25.8% over the past three years. High top-line growth has also come with rising profit margins, with net margins reaching 33% in Q1.
First Solar also has a much lower valuation than its peers. Enphase Energy trades at a 51.1 P/E ratio despite posting year-over-year revenue declines in recent quarters. Meanwhile, SolarEdge remains unprofitable, but has a projected forward P/E ratio of 208.
Demand for First Solar's utility-scale solar energy should continue to gain momentum amid the AI build-out. Not everyone will want to rely on the electric grid for power, and if Musk launches AI data centers into space, they will need solar panels. The current valuation offers a reasonable margin of safety for what can be a compelling long-term opportunity.
Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends First Solar. The Motley Fool recommends Enphase Energy. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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First Solar hasn't received as much love as other stocks riding the AI tailwind.

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