All major solar companies, including SolarCity Corp (NASDAQ:SCTY) and First Solar, Inc. (NASDAQ:FSLR), have announced their Q1 results. So, JPMorgan analyst Paul Coster takes a look at solar companies’ growth potential. Coster says that solar firms continue to post solid revenue and earnings growth amid rising demand for solar power. However, investor sentiment deteriorated during the quarter, mainly due to lower cell and panel pricing. Solar index is down 13% since its March 6 peak. The research firm says that the sell-off offers an opportunity to buy into solar growth at attractive multiples.

SolarCity SCTY

First Solar sees growth in utility-scale projects

JPMorgan has an Overweight rating on both SolarCity Corp (NASDAQ:SCTY) and First Solar, Inc. (NASDAQ:FSLR). The Tempe, Arizona-based company reported better than expected first quarter results on May 6. The company earned $1.10 on revenues of $950 million. Wall Street had called for $0.52 in EPS on revenues of $837 million. First Solar exceeded expectations mainly due to the earlier than anticipated revenue recognition for the Campo Verde project.

Lower manufacturing cost is helping First Solar, Inc. (NASDAQ:FSLR)’s gross margins. The company raised its full year 2014 EPS guidance from $2.20-$2.60 to $2.40-$2.80, though the revenue estimate remains unchanged at $3.7-$4 billion. First Solar saw a surprising increase in its pipeline to 12.2GW. U.S. utilities are actively evaluating solar power due to elevated cost and pricing volatility in natural gas, and tighter regulatory constraints on coal-power generation.  First Solar continues to improve conversion efficiency, bringing down the total cost per watt. JPMorgan believes that the company’s CdTe technology is on track to compete with poly silicon solar in the next three years.

Is NRG Energy a threat to SolarCity?

Meanwhile, SolarCity Corp (NASDAQ:SCTY)’s Q1 results were no less than impressive. The Elon Musk-backed company generated revenues of $63.5 million. But SolarCity incurred a net loss of $0.82 per share, mainly due to rising investment activity that should fuel its growth. The San Mateo-based company deployed 82MW of panels during the quarter.

SolarCity Corp (NASDAQ:SCTY) issued strong Q2, and full year guidance. The company forecasts to deploy 105-110MW in the current quarter, up 103% YoY. SolarCity’s full year deployment target is 500-550MW, compared to JPMorgan’s estimate of 510MW. For FY2015, the company is eyeing a whopping 900-1000MW in panel installations.

However, Paul Coster says NRG Energy Inc (NYSE:NRG) could pose a threat to SolarCity Corp (NASDAQ:SCTY)’s ambitions. NRG said during its first quarter earnings call that it is committed to become a leader in rooftop market by FY2015. But the research firm says market growth and size could exceed original expectations.

SolarCity Corp (NASDAQ:SCTY) shares fell 0.92% in pre-market trading Tuesday.