When investors think of energy stocks, they often overlook solar stocks. That seems to be the case even if solar stocks are ready to explode! The reality is that high potential solar stocks are worthy of investment.
The Energy Select Sector SPDR Fund (NYSEARCA:XLE) has rallied in seven of the last eight sessions and is up 7.5% from last week’s low to this week’s high.And yet, the Invesco Solar ETF (NYSEARCA:TAN) has fallen in five of the last six sessions (through July 27). From last week’s high to this week’s low, the ETF is down about 9.5%.
The truth is that solar stocks have not traded that well over the past few months. Whether that’s deserved or not is not our decision to make. Instead, all we can do is keep an eye on the solar stocks to watch — and pounce if and when they set up.
With that in mind, let’s look at a few high potential solar stocks.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is likely the most well-known name within the solar stock sphere. It’s been one of the better-trading names in the group and the No. 1 holding in the TAN ETF. Apparently, the stock is living up to its name after reporting its Q2 results Thursday, July 27.
The company delivered GAAP earnings of $1.59 a share, well ahead of analysts’ expectations for 94 cents per share. Revenue grew more than 30% year over year to $811 million, easily beating consensus estimates by more than $90 million.
Full-year guidance was solid and slightly above expectations. Management expects revenue of $3.4 billion to $3.6 billion (slightly ahead of estimates at $3.46 billion) and earnings of $7 to $8 a share (vs. expectations of $7.24 a share).
Due to this report, shares are teetering on a breakout over this month’s high of $211.28. If First Solar can break out over this area, it opens the door to $220, then potentially the 2023 high close to $232.
Shoals Technologies (SHLS)
With a market capitalization of just under $4.5 billion, Shoals Technologies (NASDAQ:SHLS) is the smallest company on this list. However, it’s one of the high potential solar stocks to watch, given that it continues to trade well.
Shares are only up about 6.5% on the year, but that’s vastly better than the TAN ETF, which is down about 6.5% so far in 2023. Further, SHLS stock is up 46.5% over the last 12 months vs. a 6.25% decline for the TAN ETF.
The company will report earnings next week, so that is a catalyst — in both directions — to be aware of. However, from a technical perspective, this one continues to do everything right.
The stock is holding above its 10-day moving average, which is short-term, trend support, as well as the recent breakout area near $26. If that changes and the stock comes under pressure, then the breakout could be in jeopardy, and $24 could be in play.
However, if the stock can hold above the $26 mark, it keeps $28-plus in play. Above $28 and then SHLS stock could climb into the $30s. Above $30 and the 2023 high climbs near $32.50.
HBrookfield Renewable Partners LP (BEP)
Brookfield Renewable Partners LP (NYSE:BEP) is a slightly different than some of the companies on this list. The Toronto-based energy firm trades on the NYSE and commands a market cap of 11.5 billion CAD. It is 60% owned by Brookfield Asset Management.
“Brookfield Renewable operates one of the world’s largest publicly traded platforms for renewable power and decarbonization solutions,” Brookfield Renewable notes. “Our diversified portfolio consists of hydroelectric, wind, solar, distributed energy, and sustainable solutions across five continents.”
BEP stock is up 17% so far this year, although shares hit a major stumble in June. Trying to recover from that slip now, investors should keep an eye on the $30.30 area.
If the stock can clear that level and the 50-day moving average, it opens the door for gap-fill and 61.8% retracement near $31. Above that, then the $32.50-plus zone could be on the table.
On the downside, bulls want to see current support hold. A break of $29 puts last month’s lows back in play.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
