Solar stocks have been on quite a roller-coaster ride in the recent months, taking a nosedive with the surprise election of coal booster Donald Trump and earlier this year spiking on speculation over a possible new tariff on Chinese panel imports. While tariffs would make solar installations more expensive, potentially threatening thousands of American jobs, it could help boost solar players which have struggled to stay profitable amidst declining prices.

This month, solar leaders First Solar Inc. (FSLR), SunPower Corp. (SPWR) and Tesla-owned Solar City (TSLA) all surpassed the Street’s consensus expectations with Q1 results. (See also: Solar Stocks Beat Analyst Expectations.)

Baird Downgrades FSLR on Possible ITC Tariff

Last week, analysts at investment firm Baird downgraded shares of FSLR to neutral from outperform, along with a price target of $38. Analysts noted shares had gained nearly 30% over the month, driven by the execution of its restructuring to manufacture its more efficient Series 6 solar module, scrap plans for a Series 5 and sell off its Series 4 inventory.

While investors rallied behind solar manufacturers on news of a potential U.S. International Trade Commission (ITC) tariff on foreign solar cell imports, Baird suggests that potential tariffs would be detrimental to U.S. solar markets, expecting trade groups to fight against them. Further, analysts at Baird say they need more clarity on First Solar’s new Series 6 margins, or a better entry point before becoming more constructive on the stock. Shares of the Tempe, Ariz.-based solar company, closing at $36.43 on Monday, extending a 13.6% year-to-date (YTD) increase.

While solar remains a volatile industry in the short term, long-term bulls are confident that a necessary worldwide shift to renewable energy -- along with increasingly cost-competitive renewable options -- will stabilize the market over time, regardless of government incentives. (See also: First Solar Earns 3 Upgrades Ahead of Earnings.)

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