Trump Slashed Solar Credits. First Solar, Sunrun Are Winners Anyway, Analyst Says.

Mizuho Securities reiterated Outperform ratings and lifted price targets for First Solar, SunRun, and Bloom Energy. (Courtesy First Solar)

President Donald Trump’s flagship tax and spending bill, signed into law on the Fourth of July, removes an array of supports for clean-energy projects, but not all parts of the sector will be hit equally.

Mizuho Securities analyst Maheep Mandloi surveyed the landscape in a research note Monday, concluding that utility-focused solar companies will face the toughest challenge as tax credits are phased out. Companies focused on domestic manufacturing, energy storage, and residential leasing may emerge unscathed.

Trump’s policy package will wind down solar and wind tax credits by 2030. It effectively requires that construction begin in the next year for projects to to be eligible for the subsidies.

That is a particular challenge for developers of utilities. “Developers have limited ability to pull projects forward given the long process of interconnecting to the grid,” Mandloi wrote. If anything, projects “are rather frequently delayed.”

While Mandloi sees some growth in demand for utility solar over the next few years, while the tax credits remain, he predicted that demand will fall off a cliff after 2029 for some companies.

Mizuho downgraded both Nextracker and Shoals Technologies, which make technology for utility-scale projects, to Neutral from Outperform. The firm also slashed its rating for the developer Enlight Renewable Energy to Underperform from Neutral.

The legislation kept some renewable-friendly policies in place, however, so Mizuho retained its equivalent of Buy ratings on several stocks within the sector. Most notably, residential solar leases can still qualify for investment tax credits through at least 2027, and tax credits for solar cells and energy storage remain in place.

Sunrun stands to benefit from the solar leasing policy, Mandloi said, because the company is shifting to a 100% lease-based model next year. Even if the solar leasing credit expires earlier than expected, he said, the company can offset any loss in solar tax credits with its energy-storage business.

Mizuho reiterated an Outperform rating for the stock, raising its price target to $21 from $13. Sunrun stock was up 1.5% to $10.26 on Monday.

On the solar cell side, First Solar is a winner, according to Mizuho. The new law places barriers on equipment coming from China, but First Solar panels are made in the U.S., Mandloi noted, and they remain the simplest choice for developers looking to avoid trade scrutiny.

The legislation also retains the Biden-era Inflation Reduction Act’s 45X tax credits, which subsidize the domestic production of clean-energy components. “FSLR has been and should continue to be the biggest beneficiary of 45X tax credits in Clean Energy,” Mandloi wrote.

Mizuho lifted its price target for First Solar to $278 from $275 and reiterated an Outperform rating. Shares were falling 1.2% to $160.46 after the opening bell.

The last of Mizuho’s top three picks in the new clean energy ecosystem is Bloom Energy, which makes natural-gas fuel cells that qualify for a reintstated tax credit. The company is a potential beneficiary of growing power demand from data centers, Mandloi said, projecting 30% higher demand in its core markets of California and New York in 2026.

Mizuho reiterated an Outperform rating for Bloom and increased its target for the stock price to $31 from $26. The stock was up 1.3% to $25.73 on Monday.

Write to Nate Wolf at nate.wolf@barrons.com