Solar is one of the fastest growing sectors in the stock market. And the recent clean energy bill that passed through the U.S. Congress as part of the Inflation Reduction Act is likely to keep that growth going. By some estimates, solar installation may triple over the next five years.
But the bullish outlook for this sector is about more than the funding the industry will receive. The Biden administration announced in June that it was suspending tariffs on solar panel components from four countries. This will be a key step in helping to untangle the supply chain for the necessary components.
This two-pronged strategy will be key to the sector achieving the Biden administration's goal of having 45% of the nation's energy supply coming from solar by 2050. That's up from the 4% the sector supplied in 2020.
In this presentation, we're highlighting seven solar stocks that stand to benefit as solar becomes an increasingly cost-effective option for consumers and for businesses.
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- Enphase Energy
- Sunrun
- First Solar
- SunPower
- Canadian Solar
- NextEra Energy
- Brookfield Renewable Partners
#1 - Enphase Energy (NASDAQ:ENPH)
Enphase Energy (NASDAQ:ENPH) was one solar stock that didn’t need much of a boost. The stock has been outperforming the broader market in 2022. And there are reasons to believe the stock still has room to run.
The company’s products solve one key issue limiting solar power acceptance. That gives customers a reason to buy beyond price. Specifically, Enphase’s microinverter technology converts direct current (DC) power from solar panels to alternating current (AC) power. This allows solar power to be used efficiently in the evening and on cloudy days.
In addition to benefiting consumers, the company’s technology eliminates the possibility of a single-point failure that can take down an entire system. This helps build acceptance with installers and gives the company a massive addressable market.
However, questions remain about the stock’s valuation. ENPH stock is currently trading above the consensus estimate of analysts. But recent price targets suggest there may be more upside.
About Enphase Energy
Enphase Energy, Inc, together with its subsidiaries, designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers semiconductor-based microinverter, which converts energy at the individual solar module level and combines with its proprietary networking and software technologies to provide energy monitoring and control.
Read More - Current Price
- $63.38
- Consensus Rating
- Hold
- Ratings Breakdown
- 14 Buy Ratings, 15 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $102.09 (61.1% Upside)
#2 - Sunrun (NASDAQ:RUN)
A good way to invest in any sector is to buy the leaders. That would be the argument for Sunrun (NASDAQ:RUN) which has one of the largest installed bases in the United States. As of September 2022, the company has over 600,000 installations in 22 states.
However, the company’s leadership isn’t showing up in the company’s stock price, which is trading flat in 2022. One reason for that may be that the company is not consistently profitable.
That being said, the company continues to deliver revenue that continues to increase on a sequential and year-over-year basis. With tailwinds likely to keep those revenue numbers high, profitability is likely to follow.
That would appear to be the opinion of the analysts tracked by MarketBeat. They give RUN stock a consensus buy with a price target of over $48 which would be a 26% upside from its current level. And since the company last reported earnings in early August, six analysts have raised their price targets, with three of those targets significantly above the consensus number.
About Sunrun
Sunrun Inc designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels and racking; and solar leads generated to customers. In addition, the company offers battery storage along with solar energy systems; and sells services to commercial developers through multi-family and new homes.
Read More - Current Price
- $10.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 9 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $20.12 (97.3% Upside)
#3 - First Solar (NASDAQ:FSLR)
Next on this list of solar stocks is First Solar (NASDAQ:FSLR). The company doesn’t install solar panels, but it’s involved in every other aspect of the process. The company manufactures solar panels, and it provides support and maintenance services for utility-scale photovoltaic (PV) power plants.
One of the bullish arguments for FSLR stock is that First Solar already has a manufacturing infrastructure. Established manufacturers stand to be a key benefactor of the $40 million that is earmarked in the Inflation Reduction Act. And for its part, First Solar has announced plans to increase its manufacturing footprint with the help of the money it receives from this legislation.
Plus, the company is showing a strong backlog of orders through 2024 and is projecting its sales to grow by an average of 27% over the next two years. That kind of growth, combined with the fact that the company doesn’t rely on any silicon from China, should be a catalyst for the stock to go higher.
About First Solar
First Solar, Inc, a solar technology company, provides photovoltaic (PV) solar energy solutions in the United States, France, Japan, Chile, and internationally. The company manufactures and sells PV solar modules with a thin film semiconductor technology that provides a lower-carbon alternative to conventional crystalline silicon PV solar modules.
Read More - Current Price
- $184.84
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $280.50 (51.8% Upside)
#4 - SunPower (NASDAQ:SPWR)
SunPower Corporation (NASDAQ:SPWR) stock is up 33% in 2022. SunPower provides solar, storage, and home energy solutions through a network of third-party dealers and resellers in addition to its in-house team.
The company makes this list due to a recently announced collaboration with IKEA. The goal of the partnership is to make solar power accessible to consumers. The partnership will be test marketed in select California markets this fall. But if successful, this could be a significant catalyst for SPWR stock which is already up 26% in 2022.
With that said, SPWR stock is currently trading above its consensus estimate. The consensus rating for the stock is a Hold. However, the company is showing strong revenue growth which is increasing both on a sequential and a year-over-year basis. And, in its last earnings report, SunPower reported a strong backlog of orders for its products and makes it likely that its future growth objectives are achievable.
About SunPower
SunPower Corporation, a solar technology and energy services provider, offers solar, storage, and home energy solutions primarily in the United States and Canada. Its solutions include the Equinox and SunVault systems which are pre-engineered modular solutions for residential applications that combine solar module technology with integrated plug-and-play power stations, cable management systems, and mounting hardware that enable dealers and installers to complete system installations, as well as for end customers to manage their energy production.
Read More - Current Price
- $0.12
- Consensus Rating
- Strong Sell
- Ratings Breakdown
- 0 Buy Ratings, 6 Hold Ratings, 7 Sell Ratings.
- Consensus Price Target
- $2.88 (2,248.7% Upside)
#5 - Canadian Solar (NASDAQ:CSIQ)
Investors looking for some international exposure should consider Canadian Solar (NASDAQ:CSIQ). The company has a business model similar to First Solar but operates in the Canadian market. CSIQ stock is up 36% in 2022 and continues to show strong growth in revenue and earnings. The company has two long-term Operations & Maintenance Deals the company signed with two solar PV plus battery storage projects in the United States.
However, the outlook for Canadian Solar is similar to other companies in this sector. That is, how much growth is left? The stock is bumping against the consensus estimate despite delivering revenue growing sequentially and year-over-year.
And investors also will need to mull the analysis of Goldman Sachs (NYSE:GS), which is questioning the impact of the company’s aggressive expansion plans on its free cash flow, particularly as the company’s average selling price is likely to continue sliding in 2023 and beyond.
About Canadian Solar
Canadian Solar Inc, together with its subsidiaries, provides solar energy and battery energy storage products and solutions in in Asia, the Americas, Europe, and internationally. The company operates through two segments, CSI Solar and Recurrent Energy. The CSI Solar segment designs, develops, and manufactures solar ingots, wafers, cells, modules, and other solar power and battery storage products.
Read More - Current Price
- $11.80
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 3 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $20.59 (74.5% Upside)
#6 - NextEra Energy (NYSE:NEE)
NextEra Energy (NYSE:NEE) is not a pure-play solar stock by any means. However, it is one of North America's largest overall energy providers. So if you’re buying NEE stock, it’s on the premise that its “all of the above” approach will be a winning strategy.
And the company is posting revenue and earnings growth to back up the recent run-up in NEE stock. However, unlike many stocks on this list, NextEra stock is down in 2022. And the stock price is bumping up against the consensus estimate.
This leads to similar questions about the valuation of NEE. But recent price target increases since the company’s earnings report in August suggest that there may be a higher ceiling for the stock.
And, even if that doesn’t happen, NextEra offers an attractive dividend. In fact, the company is a member of the exclusive Dividend Aristocrats club this year and has increased its dividend in each of the last 28 years.
About NextEra Energy
NextEra Energy, Inc, through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear,natural gas, and other clean energy. It also develops, constructs, and operates long-term contracted assets that consists of clean energy solutions, such as renewable generation facilities, battery storage projects, and electric transmission facilities; sells energy commodities; and owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets.
Read More - Current Price
- $76.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $86.54 (12.6% Upside)
#7 - Brookfield Renewable Partners (NYSE:BEP)
The last stock on this list of solar stocks to buy is Brookfield Renewable Partners (NYSE:BEP). As its name suggests, the company is 100% focused on renewable energy However, like NextEra, it is not 100% focused on solar energy. Its portfolio includes hydropower and wind power projects.
Solar represents just a small portion of its portfolio at this time. But that changed significantly when the company acquired solar power from 600 of Exelon’s solar sites in the United States. That is an important step into the company to make good on its estimates to make solar energy the source of most of its energy production by the end of the decade.
If you’re looking for massive share price growth, BEP is not for you. However, it is a solid dividend stock with a yield of over 3%.
About Brookfield Renewable Partners
Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, and Brazil. The company generates electricity through hydroelectric, wind, solar, distributed generation, and pumped storage, as well as renewable natural gas, carbon capture and storage, recycling, cogeneration biomass, nuclear services, and power transformation.
Read More - Current Price
- $24.98
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $31.78 (27.2% Upside)
The renewable energy sector continues to generate strong opinions and emotions from true believers and skeptics alike. However, investors need to put their personal feelings about the energy sector aside when deciding on where to invest their money.
That's the takeaway from this presentation. The fact is billions of dollars are flowing into the renewable energy sector regardless of how individual investors may feel about the sector.
Solar stocks will be one of the major beneficiaries of this shift to clean energy. One reason is that technology largely exists. And with additional incentives being provided by the federal government, this is a sector that's likely to show strong growth. How strong? Several research firms agree that the solar market is going to grow at a compound annual growth rate (CAGR) of more than 20% over the next five years. And Fortune Business Insights estimates that the global market will be worth $1 trillion at the end of 2028.
That's the kind of growth that's hard to ignore. Still if you're uncomfortable investing in individual solar stocks, investors can look at an ETF such as the Invesco Solar ETF (NYSEARCA:TAN) which is up about 14% in 2022 (as of September 9, 2022).
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