Written by MarketBeat Stafff
September 29, 2021
Investors have been frustrated by the renewable energy sector for decades. One reason for that is the technology was not ready for prime time, at least not in a cost-effective way. That is changing rapidly and with it the opportunity to be found in renewable energy stocks. However, within the renewable energy sector, wind and solar remain on top of the pyramid. The focus of this unique presentation is on solar stocks that are ready to break out.
Yes, President Biden’s infrastructure plan could have a significant impact on the sector. But interest in solar power has been growing for several years. One reason is that it’s become a national play. Solar used to be limited to areas like California and Florida, but improvements in the efficiency of the technology and the ability to capture the power for future use make it a viable option in more areas of the country. As evidence of this, the total amount of solar capacity installed throughout the country can power approximately 18 million homes.
As renewable energy options continue to expand, so will the opportunity for growth in solar. This is the beginning of what stands to be a multi-year trend. And there’s no time like the present for opportunistic investors to get involved.
Quick Links
- Enphase Energy
- Sunrun
- First Solar
- Canadian Solar
- NextEra Energy
- Brookfield Renewable Partners
- Solar Window
#1 - Enphase Energy (NASDAQ:ENPH)
If you’re a fan of marketing, then I can give you a good reason why Enphase Energy (NASDAQ: ENPH) tops my list of solar stocks to buy. The company is solving one of the key issues that limit solar power acceptance. And anytime a company does that, it gives customers a reason to buy beyond price.
In this case, Enphase uses microinverter technology which converts direct current (DC) power from solar panels to alternating current (AC) power. The use case is as follows. Solar power does not generate in the evening and on cloudy days. Converting solar energy to AC power allows solar power to be stored and efficiently used at times when solar power is not being generated.
In addition to benefiting consumers, the company’s technology is also being embraced by installers because it doesn’t require a central inverter that could lead to a single-point failure that can take down an entire system.
Investors are concerned about the stock’s valuation. However, according to MarketBeat data on Enphase Energy, the stock may have a 20% upside from its current price of approximately $154. Analysts like the company’s accelerating revenue which for the first half of 2021 has nearly eclipsed the company’s total revenue for all of 2019.
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
- $71.45
- Consensus Rating
- Hold
- Ratings Breakdown
- 14 Buy Ratings, 15 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $100.33 (40.4% Upside)
#2 - Sunrun (NASDAQ:RUN)
One way you can tell that solar stocks are surging is with the number of solar panel installers being hired. And that’s a good reason to consider Sunrun (NASDAQ: RUN). The company bought Vivint Solar in 2020 in a deal that combined the two largest residential solar companies in the United States. Here’s where the bulls and the bears will spar.
The bears would say that even after the Vivint acquisition, the company’s market share is just 15%. And the company competes with private installers, which illustrates that there is a low barrier to entry. Bulls will argue that the Sunrun’s 15% market share is nearly double its nearest competitor and the company is showing strong year-over-year revenue growth.
RUN stock is down 37% in 2021 as investors are losing patience with the slow pace of the infrastructure bill moving through Congress. However, if you believe the analysts, this price drop can be a tremendous buy-the-dip opportunity. The consensus price target of near $80 would be nearly double RUN stock’s current price. And, Sunrun is on pace to easily outpace 2020 sales, a year in which the company saw sales skyrocket in the back end.
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
- $9.87
- Consensus Rating
- Hold
- Ratings Breakdown
- 12 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $19.21 (94.7% Upside)
#3 - First Solar (NASDAQ:FSLR)
First Solar (NASDAQ: FSLR) is not an installer of solar panels, but it’s a company that has its fingerprints on 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.
The company is a relatively young company having just been founded in 1990. In that short time, First Solar has established a global footprint on four continents. Like many solar companies, First Solar saw strong growth in 2020 despite the Covid-19 pandemic. But, also like other solar companies, FSLR stock took a big dip in the first quarter of 2021.
However, this is where the story gets better. As of this writing, First Solar has recovered most of its losses. The company is also one of the strongest solar companies from a fundamental standpoint. When the company reported earnings in late July it had a cash position of $2.1 billion and minimal debt. That combined with a P/E ratio that remains at the low end of its historical range makes FSLR stock look like a solid buy.
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
- $182.39
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $279.04 (53.0% Upside)
#4 - Canadian Solar (NASDAQ:CSIQ)
Another company with a similar business model to First Solar is Canadian Solar (NASDAQ: CSIQ). As its name says, the company does business in Canada. However, one of the catalysts for CSIQ stock may very well be to long-term Operations & Maintenance Deals the company signed with two solar PV plus battery storage projects in the United States.
The deals were announced on September 7, 2021 but in the first week, it hasn’t had much effect on CSIQ stock. That is likely to change. Analysts give the stock a price target of $49.50 which is a 34% gain from its current price. Before that happens, however, the company will have to start generating revenue from some of its new contracts. That’s not likely to occur until 2023 which is one reason an analyst from GLJ Research downgraded CSIQ to a sell rating.
That’s not to say that Canadian Solar is struggling to generate revenue. In the company’s most recent quarter revenue was up 105% from the prior year which took into account the pandemic. Viewed through a wider two-year lens, revenue was still up an impressive 37% from the same quarter in 2019.
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
- $11.50
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 2 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $18.58 (61.6% Upside)
#5 - NextEra Energy (NYSE:NEE)
NextEra Energy (NYSE: NEE) may not be the first company that comes to mind when you think about solar providers. And of all the companies on this list, NextEra is certainly not a pure play on solar. However, it is one of the largest overall energy providers in North America.
The company distributes electricity throughout the United States and Canada. But it also has some wind distribution projects in addition to its solar projects. In that sense investors are not just buying solar energy, they are buying into a “both/and” energy story that is playing out in profitable ways in 2021.
NEE stock is trading near the top of its 52-week range and analysts are forecasting that there could be some near-term downside to the stock. However, NextEra offers something that most companies in this sector do not, an attractive dividend. In fact, the company joined the exclusive Dividend Aristocrats club this year when it increased its dividend payout for the 25th consecutive year.
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
- $71.67
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $87.15 (21.6% Upside)
#6 - Brookfield Renewable Partners (NYSE:BEP)
If NextEra Energy is still too much of a “traditional” energy stock for you, consider 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.
In fact, solar represents just a small portion of its portfolio at this time. But according to the company that is going to change in a big way. The company estimates that solar energy will make up the majority of its energy production by the end of the decade. A catalyst towards that goal is the company’s deal with Exelon in which Brookfield will acquire solar power from 600 of the latter company’s solar sites in the United States.
If you’re looking for massive share price growth, BEP is not for you. However, it is a solid dividend stock and currently has 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
- $22.95
- Consensus Rating
- Buy
- Ratings Breakdown
- 8 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $31.78 (38.5% Upside)
#7 - Solar Window (OTCMKTS:WNDW)
Whenever I look at a field such as solar energy, I like to provide a little something for everyone. You’ve had some growth picks; and a couple of dividend darlings for income investors. But if you’re a speculator, Solar Window (OTCMKTS: WNDW) may suit your investing style. Solar Window is the creator of LiquidElectricity, a proprietary technology that applies a transparent coating of organic photovoltaic solar cells to glass, plastic, and films. The company has 120 patent claims.
WNDW stock is classified as a penny stock. And it’s down 46% for the year. However, a little perspective is needed. It appears that Solar Window got swept up in the renewable energy fervor that overtook the market at the beginning of 2021. Combine that with the appetite that retail investors had for penny stocks and WNDW stock climbed to over $30 per share. That was not sustainable nor did it fit the company’s history.
If you had bought the stock five years ago, you’d have a 12% gain. That’s nothing to brag about, but it fits a company that has a lot of potential but no product in market at this time.
About SolarWindow Technologies
SolarWindow Technologies, Inc engages in the development of transparent electricity-generating coatings and methods under LiquidElectricity Coatings brand. The company's coatings generate electricity by harvesting light energy from natural sun, artificial light, and low, shaded, or reflected light conditions, which is applied to rigid and flexible glass, and plastic surfaces to transform ordinary surfaces into organic photovoltaic devices.
Read More - Current Price
- $0.32
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
For individuals who embraced solar power in the 1980s, the time of vindication is here. What seemed like fringe, impractical technology is becoming a mainstream alternative as the nation launches its renewable energy future in earnest.
As solar power goes mainstream, solar stocks will start to pass that growth along to investors. And although many of these stocks have given up some impressive gains this year, investors shouldn’t be shy about buying the dip.
But like many speculative sectors, the expression “let the buyer beware” applies to solar stocks. Some solar companies are only in business because of subsidies. That’s not the case, however, with the companies listed in this presentation. These stocks represent some of the quality opportunities available in this sector. And now is as good of a time as any for investors to jump in. Some analysts project the global solar energy market to be worth $223.3 billion by 2026. That would equate to a compound annual growth rate (CAGR) of 20.5%.
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